I'm in the same boat. I had to install AIR in order to run the Pandora Desktop app. The other day, I launched Pandora and a window popped up saying there was an AIR update. I tried to install but nothing happened.
I went to Adobe's web site and downloaded AIR 2 from there. Double clicked to launch the installer and, again, nothing.
Uninstalled old version of AIR and ran CCleaner. Same results. Tried to launch AIR installer and nothing.
Finally found an old version (1.5.3) of AIR and re-installed it without issue.
All is right with the universe except
for the fact that I cannot upgrade to the latest version of AIR.
The forum threads on Adobe's web site dealing with this same issue are all dead ends as well.
Just ran Adobe.com and, sure nuff, a window popped up requiring an AIR update. I clicked "OK" and it ran without a hitch...kinda. It didn't install AIR 2, it installed version 1.5.3.
My head hurts.