I've finally solved my arxiv problem with pdflatex generated by Lyx. Reading the instructions closely, arxiv says to put the \pdfoutput=1 in the first 5 lines of the .tex file. They were not kidding! I was putting it in the latex preamble in Lyx which of course was not in the first 5 lines of the .tex file.
Problem solved! Thanks for the support.
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myriam
