Thanks guys. I unistalled Java completely, deleted eclipse, rebooted my laptop, downloaded and reinstalled java and same with eclipse. After importing workspace I tried to run the game again and got the same error. Below are screenshots that really don't say much.
Here is what I get in Eclipse console
And if I try to run it from command prompt:
I am playing around with pure Java2D, so no fancy libraries or paths to mess up things. BTW. I just tried to start a different project and it ran just fine, which leads to conclusion that something is wrong only with this particular project.... will dig deeper tonight. Again any pointer would be helpful.