I've tried setting the Custom User Interface GPO option to
java -jar GyroUI.jar
as well as using the full path
C:\Program Files\jre7\bin\java.exe -jar GyroUI.jar
But neither seem to result in anything except the desktop background.
I know this works normally as I can run the jar file just fine using the command prompt, and I get the UI as expected.
C:\Program Files\jre7\bin\java.exe -jar "C:\Program Files\Sahara\GyroUI.jar"
Ended up being the solution, the problem was being caused by the application crashing, not by the shell failing to launch.