I had same issue on launching App-V executable. Microsoft posted this MS KB article http://support.microsoft.com/kb/2783120 and it didn’t help me. According to that KB article I am trying to launch an virtual application from unpublished package. That’s not true on my case.
It turn out to be my connection groups have conflicting apps. One of the virtualized app is sharing two different connection groups. Damn Me! I have corrected the connection groups and now my virtual application works beautifully. Hope this information helps someone else.