If you are determined to use an applet  then why use java  ????

recently Microsft have lost to Sun and now HAVE to supply Suns VM on Windows forever ! (a wrong decision by the courts I must add [my opinion])

But - with programs being written all the time in VB.NET then it won't be long before the .NET CLR is installed on every windows machine - I am suprised that it was not included in XP - which I thought it would be. future Windows will all have it built in.

Just make what you want using a .NET Embedded Control.

Basically, any Windows Form you create (nothing to do with asp.NET - WINDOWS FORM) can be changed into a control and embedded in a web  page.
(Example at FrameworkSDK\Samples\QuickStart\winforms\samples\iesourcing)

Notes to worry about :: if you do write a simple windows form to get data from your server then you will have to supply the connection string within that form - and .NET code can be disassembled (as can java). So - to make things safe you would need to do make a web service. This runs on your server and acts as go between between your database  and your embedded control. More work but thats life. Strings are easy to spot inside IL code so you could try and disguise your connection string by generating it from ascii chars and obfuscating it - but it will still be in there for the determined. I would like to try to find a string disguised like that - but some may.

There may be a way round that I haven't fully looked into yet.
C++ gives you the ability to make an unmanaged function call within a managed assembly. And that function cannot be disassembled - so you could potentially save your self the effort of a web service. But - all you'de need to do would be to call that function to retrieve the password (unless you could put stipulations on who the function outputs too) - so it may be a waste of time. Personally - I'd do a web service.

At this point is it relevant whether the form is updated from the server side or the client side ?? both will take time and both ARE making posts to the server because ultimately - it has to connect to the server to get the data.

Use the IFrame unless your a .net guru with lots of free time and money to burn.