*pant, pant* Finally managed to get the lobby system functional after much hair-pulling-out. At one point I actually had 5 IDEs all open at once trying to tie everything together. It works like this;
The player goes to the log-in page and is directed to a lobby applet. From here he can choose to join a game or start a game. If he starts a game a new game server is downloaded onto his machine and fired up, informing the central server as it does so. Now the player's machine has become a server, it appears in the central server game list and other players can connect to it by choosing to join the game from the lobby applet. If they do this, the client applet is downloaded from the central server and connects to the game server. Simple, no? *cough*
Fortunately the game server is very CPU light, so a player can both host a game and play in it without any problems.