To expand on this as I pull what's left of my hair out, I find that if I put a breakpoint in the app I can then click on Flash Builder without it closing the emulator, and I can step through ok... BUT... if I then press play to let it go on again, it loses focus.
This is utterly infuriating and has pretty much wasted a day of coding so far, and running the code on the device is worse as it just closes at random points.
I have completely uninstalled and done a fresh install of Flash Builder.
I have tried overlaying Air SDK 3.5 on both the Flex 4.6 and the air directories
I just cannot for the life of me think what is causing this.
Found the issue.
My co-worker had overridden a handler thusly:
override protected function deactivateHandler(event:Event):void
This was for some reason or other... but it wasn't affecting him as he was only testing on a nexus 10, which for some reason that event doesn't get fired unless you are actually trying to exit the app.
But on the Galaxy Xoom, and the air emulator it gets called just whenever the app is told to go to sleep or lose focus I guess.
Wow, that wasted a LOT of time!