If Software Update reports that the update is available, it means that you are or have been running Java. Install it. It will remove the Flashback malware.
If Security Update 2012-003 does not appear, then you have not been running Java. Leave it disabled.
In other words, merely un-checking the "enable Java" checkbox will not remove the malware if it is already present. You should install the update if it is offered to you.