I think it could be related to version of AIR which has been used to compile.
Maybe its someting that should be posted on the AIR forums.
FYI, problem solved:
There is a version of Air 3.7 that has a bug, so I upgraded to a newer one.
Bug version: Version 22.214.171.1240
New version: Version 126.96.36.1990
It seems as though, there might be another bug with AIR and Android 4.3
If you use application scaling (applicationDPI) and css media queries.
When deployed on the device (Galaxy Nexus) 160 dpi is always fired, rather than 240.
Anyone else come across this?