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Default Open method of workbooks fails when Excel is hosted in IE

I have an Excel macro in an xla addin that calls the Workbooks.Open method. The piece of code works fine if I just execute it from Excel normally

However, if I call the macro via an instance of Excel that is hosted in Internet Explorer (in .Net as it happens) the Workbooks.Open method fails with the error "Method 'Open' of 'Workbooks' failed".

I'm using Office XP on Windows XP Pro

I've discovered loads of people in the newsgroups who have had this problem, but I haven't see any answers. Surely their must be one?
 
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