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That's the way to it. Ring the agency tell them you're not going to work until all invoices are paid. I'd also speak to the client and tell them you won't be in on Monday unless the agency pays you for the last 3 months. I'm sure by the end of the day it'll be sorted, in the meantime start...
The build up to Christmas is always quiet. However I don't think the contract market is in the best state at the moment, you might want to stay in your permie job for a little while longer.
To be honest, I've never really struggled to find Java contracts, only once and that was back in 2009 during the height of the recession. However I'll take your comments on board, maybe look for a more specialist and higher rate one next.
I had 3.5 years experience with Java before I went contracting as a Java dev. My first rate was in the mid 300's. I've now been contracting 4 years and my rates have varied between 250 and 400 a day.