For the Background Updates ('Allow Adobe to install Updates (recommended)' option), both players are updated, however, the Activex version is updated first and then about an hour later the Plugin is updated.
For the Notification Updates ('Notify me to install updates' option), Flash Player checks for an update when Flash content is played. If an update is available, it creates a registry entry that then launches the Update Notification window when the system is rebooted or the user logs off/on. In this scenario, whichever version of Flash Player (Activex or Plugin) was in use during the check is the one that creates the registry entry and is the one that is updated. I know this isn't ideal, however, this is legacy functionality and has been this way for a very long time. Unless you've modified the update check interval, the default is 7 days.
Since you indicate the Plugin is not being updated via Background Updates, I'd like to look at the FlashInstall.log file on an impacted machine. Unfortunately, Background Updates don't write to the log file unless verbose logging is enabled (which you most likely don't have configured), but I may still be able to glean some information from the current log file on the system. Please provide the log file from an impacted machine using the instructions here, The specified item was not found..
To enable Background Update verbose logging, add the following to the mms.cfg file: SilentAutoUpdateVerboseLogging=1. Background Updates checks for an update once per day, so if you enable this today, it should contain related information within a day or so, depending on when the Background Update task is actually configured to execute on impacted machines.
OK, I found one machine where the PlugIn version was updated and not the ActiveX version. Your answer makes sense if more people are using IE than I thought.
Upon reflection, I think the easiest solution is to set "Allow Adobe to install Updates" and stop wasting time chasing down what is probably a bad assumption on my part. I've started setting that option ("Allow Adobe to install Updates"). I'll check back in a couple of weeks / months and revisit this if things still seem fishy
Thanks for your help.