I think you should change your approach, instead of trying to change the component output, change the input instead ...

So, all this does, applies a circular (alpha-based) mask to another image
BufferedImage master = ImageIO.read(new File("/Volumes/Disk02/Dropbox/MegaTokyo/thumnails/megatokyo_omnibus_1_3_cover_by_fredrin-d4oupef.jpg"));
int diameter = Math.min(master.getWidth(), master.getHeight());
BufferedImage mask = new BufferedImage(master.getWidth(), master.getHeight(), BufferedImage.TYPE_INT_ARGB);
Graphics2D g2d = mask.createGraphics();
applyQualityRenderingHints(g2d);
g2d.fillOval(0, 0, diameter - 1, diameter - 1);
g2d.dispose();
BufferedImage masked = new BufferedImage(diameter, diameter, BufferedImage.TYPE_INT_ARGB);
g2d = masked.createGraphics();
applyQualityRenderingHints(g2d);
int x = (diameter - master.getWidth()) / 2;
int y = (diameter - master.getHeight()) / 2;
g2d.drawImage(master, x, y, null);
g2d.setComposite(AlphaComposite.getInstance(AlphaComposite.DST_IN));
g2d.drawImage(mask, 0, 0, null);
g2d.dispose();
JOptionPane.showMessageDialog(null, new JLabel(new ImageIcon(masked)));
The advantage of this is that you can get soft cropping (which setClipdoes not provide), and also not mess with the existing cropping form of the component
applyQualityRenderingHints...
public static void applyQualityRenderingHints(Graphics2D g2d) {
g2d.setRenderingHint(RenderingHints.KEY_ALPHA_INTERPOLATION, RenderingHints.VALUE_ALPHA_INTERPOLATION_QUALITY);
g2d.setRenderingHint(RenderingHints.KEY_ANTIALIASING, RenderingHints.VALUE_ANTIALIAS_ON);
g2d.setRenderingHint(RenderingHints.KEY_COLOR_RENDERING, RenderingHints.VALUE_COLOR_RENDER_QUALITY);
g2d.setRenderingHint(RenderingHints.KEY_DITHERING, RenderingHints.VALUE_DITHER_ENABLE);
g2d.setRenderingHint(RenderingHints.KEY_FRACTIONALMETRICS, RenderingHints.VALUE_FRACTIONALMETRICS_ON);
g2d.setRenderingHint(RenderingHints.KEY_INTERPOLATION, RenderingHints.VALUE_INTERPOLATION_BILINEAR);
g2d.setRenderingHint(RenderingHints.KEY_RENDERING, RenderingHints.VALUE_RENDER_QUALITY);
g2d.setRenderingHint(RenderingHints.KEY_STROKE_CONTROL, RenderingHints.VALUE_STROKE_PURE);
}