Over on the App-V Blog jim wrote a really handy little piece around shell extensions and App-V which links into a number of the conversations that i have had this week. I think that this is important to note and highlight as it keeps coming up in conversation!

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Microsoft Application Virtualization does not support applications that use shell extension handlers implemented with a custom dynamic-link library (DLL). The reason that APP-V cannot support applications with custom shell extensions is that this would require providing Windows Explorer access to the virtual environment.  Shell extensions are sometimes referred to as Shell integration.

Some applications allow disabling of their customer shell extensions.  If the application you would like to sequence allows you to disable the shell extension it probably can be sequenced in App-V.

Shell extensions are in-process Component Object Model (COM) objects that extend the abilities of the Windows operating system.

For more information about Shell Extension Handlers check out this MSDN article.
http://msdn.microsoft.com/en-us/library/cc144067(VS.85).aspx

You can use the sysinternals tool Autoruns to view installed Explorer shell extensions.
http://technet.microsoft.com/en-us/sysinternals/bb963902.aspx

You may also enjoy reading the case study about Sequencing Applications for Deployment at Microsoft.
http://technet.microsoft.com/en-us/library/dd871278.aspx.

Jim Truchon | Senior Escalation Engineer