There is a bug in App-V 5.0 that will sometimes label an application incorrectly in the TargetInPackage field of the manifest XML file. There is no doubt of that: App-V 5.0 SP2 does resolve.
The problem seems to be the way Citrix is reading the manifest file. If the application truly does not reside in the package (aka Microsoft Word) and you have the application published from App-V, Citrix will not load the Virtual Environment properly.
Let me give an example. I sequence an application called MathType with App-V 5.0 SP2. The application has a GUI for part of the application. The main parts of the Application are Word and PowerPoint plugins. I have Microsoft Office installed locally in my VDI/RDS systems. I sequence the application with Office installed locally. I launch a desktop to the VDI/RDS system and the application populates in the Start Menu appropriately from App-V. This will work just fine with my shortcuts "Word 2013 with MathType" or "PowerPoint 2013 with MathType". I use Citrix and publish the App-V application from the Citrix methodology of finding the App-V applications. The App-V application will now attempt to launch but Citrix will launch Word or PowerPoint without the Virtual Environment. Both Office products do not know about the Add-In from the Virtual Environment. When an application in the App-V package has the TargetInPackage set to False, you can look at the logs provided by Citrix and see that the application will never attempt to load the Virtual Environment.
Now for the workaround:
Publish the application to the Start Menu with App-V. Look at the properties of the shortcut and you will see the target as "C:\Program Files (X86)\Microsoft Office\Office15\WINWORD.exe" /appvve:<GUID>
Take this target and create a manual published application in Citrix XenDesktop giving it the above as the program and arguments. Finish the publishing and everything seems to work without an issue at this point. I foresee an app update may cause for the application to be republished, but until Citrix works this out, this seems to be the way it works.
Note: I have not tried this with an Internet Explorer plugin, but I assume we will run into the same issue since it is launching IE from outside of the package.
I need Citrix to look into their publishing methodology and figure out why the App-V Virtual Environment will not load when the App-V manifest states TargetInPackage=false. The only reason the application would be listed as an App-V application is if we need it to launch from inside the VE.