This issue has come up 3 times in our environment. After installing the clickonce application, I expected it to startup automatically (as I have it set to do after install completes) but it did not. I try running the app from the shortcut and it brings up the "Launching Application" dialog but then immediately closes and the application is not started. It's acting as if another instance of the application is currently running (I have it set to only run one instance at a time).
This issue is profile specific. Installing it on the same machine using a different profile runs just fine, but for whatever reason, no amount of uninstalling, reinstalling, and restarting the computer seems to fix a profile once it runs into this problem. Our current fix for this is to completely delete the profile and "reload" it. I'd really like to know what the actually problem is though, being that we've run into it 3 times now.
Some other information that may be of use:
this application was originally deployed using Windows Installer (MSI). I uninstalled the app from the Add/Remove Programs prior to installing the newer Clickonce version.
These users were previously part of local admins group (while running MSI version). Their privileges have since been lowered to "standard user".