I went through the same headache as you. Using notepad and an SDK forces you to rely on some nutty batch files to compile everything. Plus you have to manage your manifest files and .jad files yourself. Its a big mess.

Fortunately, Sun has a Wireless Toolkit that is VERY helpful when it comes to all this. Get it here:

http://java.sun.com/products/sjwtoolkit/download-2_2.html

Dont be confused, this kit doesnt have a source file editor. Source files should be created using notepad (I use VStudio, it has pretty colors). When you run KToolbar, you will get a small window. This is your project manager. If you want to make a new coding project, choose "New project..." on the toolbar. This option will set up a project directory for you. This directory will show up in your "apps" directory under the WTK directory. When this is set up, all you have to do is open your project directory and:

-Drop your source files in the "src" folder.
-Drop any resources in the "res" folder.
-Hit "Build" in your project manager.
-Hit "Project->Package->Create Package" in the project manager.
-Hit Run.

Your program is compiled, any errors are in the console, and if everything was successful, an emulator pops up with your app.

Open one of their demos for an applet skeleton, it will save time getting started.

Oops... did you say youre already using KToolkit? heh... yeah, well, for any other user that wants a good way to get started... there ya go!