The Java stack trace seemed to be complaining about the : character, but the issue was with the unpaired double quotation marks in the various paths that I had. I removed those, and now it works. A fresh look at the issue and help from my team resolved the issue. It also works when I have paired double quotation marks in the paths in the arguments XML tag in jenkins.xml, see below:
<executable>%JAVA_HOME%\bin\java.exe</executable> <arguments>-Xrs -Xms3g -Xmx3g -Djava.awt.headless=true -Djava.net.preferIPv4Stack=true -Djava.io.tmpdir="C:\tools\Jenkins\tmp" -Dorg.apache.commons.jelly.tags.fmt.timeZone=America/Chicago -Dhudson.lifecycle=hudson.lifecycle.WindowsServiceLifecycle -jar "C:\tools\Jenkins\jenkins.war" --httpPort=8080 --webroot="C:\tools\Jenkins\war" --pluginroot="C:\tools\Jenkins\plugins"</arguments>