I figured out a fix for this; I went from a direct connect to an SDE service connection for the source data in my ArcMap project and ArcReader 10 was able to access the PMF fine. I was using direct connect with the 9.3 ArcReader and it worked fine. I know direct connect is the recommended method of connecting but when building a project to publish for ArcReader 10 you might want to consider the SDE service connection instead.I had the same problem with using direct connects in ArcReader 10. Reverting back to SDE service connections fixed the problem.
Is there a fix for ArcReader 10.1? I'm installing it on a new win7 machine and it won't connect to ArcServer data though shapefiles are fine. I don't see an SQL Native client folder on the 10.1 install disk though. Something changed? This works fine on all the other PCs, though those were upgraded from ArcReader 10.0