I just saw the question at www.outlooktalk.com/ftopic10504.html about getting at "application not found" error in Outlook when trying to open a .pdf attachment. This happened right after upgrading from Acrobat Reader 6 to 7.

Here's the solution (which worked for me), courtesy of Brian Tillman at
www.outlooktalk.com/ftopic43327.html.
Start Menu > Control Panel > Appearance and Themes (and/or Folder Options) > "File Types" tab. Locate the .pdf file type and correct the file association either by clicking on the "Restore defaults" button or by clicking on "Change" and then navigating to where Acrobat Reader 7.0 is installed.