if you look at the launcher's build number VS the build number in that image, you would see that the launcher in the image is very outdated.
now, about PermGen...
"Increase PermGen Size" use to set PermGen to 256, but when launcher updated to 1.6 they made it so the launcher always uses PermGen 256 without having to set it.
so unless your custom JVM argument made it use more than 256, it should work.