Problem solved:
STEP 1:
Uninstall Corona SDK (I'm using Build 505 for Windows).
STEP 2:
I totally removed all traces of JAVA (jdk, updates, jre, everything) using Revo Uninstaller. Then, I re-installed Java JDK1.6.0_21 (the same version I had before the uninstall) from scratch.
STEP 3:
Re-install Corona SDK.
NOTE:
I avoided downloading and installing the latest JDK because it might break my Netbeans and Eclipse, and other Java Apps which I already have on my PC (which had their libraries config set on JDK1.6.0.21). Also note that this solution worked for me because the error was caused by java
path. See screenshot below. If your crash was caused by some other factor, then this might not work for you. Also, I am already subscribed to Corona when I found the solution.
Below is the screenshot of the error I had:
