I think I've found the problem. The issue doesn't happen with Adobe Reader 10.0 full stop. However the issue occurs with version 10.0.1 or later when "Protected Mode" is enabled. Disabling Protected Mode resolves the problem, at least for me.
This workaround has been tested with Reader 10.1.3.
Could Adobe AIR 3.x be doing something that Reader interprets as malicious, thus why the issue only seems to occur when Protected Mode is enabled?
Thank you for posting a possible workaround. For others interested in this bug, please give the workaround a try and let us know in the bug comments and vote section.