Personally, I say GO.
I was going to be going there in May of '98, but due to civil unrest in Indonesia I had to cancel (not because I was afriad, but because Garuda was cancelling flights left and right, Merpati was in trouble, etc.). The point: Be VERY certain to understand the cancellation policies. The US agent for Amanresorts at the time (and there was only one, then, and I can't recall which it was) had an "x-number-of-days-cancellation-or-you're-fined-one-night's stay" policy and I missed the number of days. When I had to cancel and explained that I had no way to get to Yojakarta or leave, they waived the penalty, but understand the penalties if you *do* choose to go.
I was in Surabaya last August, and believe me, the Mandarin Oriental and the locals were thrilled to have a visitor, American or not. If you *do* go, please post a trip report - I'm still eager to visit Borobodur. And from what I've read, the Amanjiwo is the way to go. I understand your trepidation, but I'm of the "you can't live life afraid" school (unless my mom is angry). I don't mean that condescendingly, it's just the way *I* view it, personally. I hope you go.
Will