This should be right. The classpath with only the jar name should be usable from any known CLASSPATH location such as the lib\ext of the running version.
Execute java.exe using the full path to the bin that shares the version with where you dropped the lib\ext. See if its your java.exe thats in Windows\system32 that's causing that issue.
BTW, what is the actual stack trace you are getting? I assumed a classloader issue with the end result of a NoClassDefFound error.