AppData folder redirect causes Lookup fields to break with the error: "The system cannot find the file specified" in Microsoft Dynamics CRM 2011

Consider the following scenario:

Users who have the %AppData% folder redirected to a network share notice that Lookup fields fail to populate correctly after selecting a record. In addition, users may notice that after selecting a record in the Lookup Field web dialog box, a red "x" will populate in the field instead of the record that was selected. This issue occurs in both the web and Outlook clients.

If a trace is ran on the Outlook client, the following error appears during this process:

>JavaScript Error: The system cannot find the file specified.
>
>    <Function>anonymous($p0){var$v_0=null;try{$v_0=this.$k_3();if(!IsNull($p0)){var$v_1=String.format("Timestamp:Loaded={0},Updated={1},Saved={2}{3}{4}",this.$H_3.toString(),!IsNull(this.$A_3)?this.$A_3.toString():(newDate).toString(),!IsNull(this.$9_3)?this.$9_3.toString():"","\n",$p0);this.get_element().setAttribute(this.$J_3,$v_1)}}catch($$e_1_0){if(!IsNull($v_0)){var$v_2=String.format("Timestamp:Loaded={0},Updated={1},Saved={2}{3}{4}",this.$H_3.toString(),this.$A_3.toString(),!IsNull(this.$9_3)?this.$9_3.toString():"","\n",$v_0);this.get_element().setAttribute(this.$J_3,$v_2)}}this.get_element().save("LookupMruItems")}</Function>
>    <Function>anonymous($p0){this.$H_3=this.$19_3;var$v_0=this.$14_3($p0);$v_0=this.$15_3($v_0);this.$W_3($v_0);for(var$v_1=0;$v_1<this.$F_3.length;$v_1++){var$v_2=this.$F_3[$v_1];$v_2($v_0)}this.$F_3=newArray(0);return$v_0}</Function>
>    <Function>anonymous($p0){var$v_0=null;if($p0&&this.$j_3)return$v_0;this.$19_3=newDate;var$v_1=newRemoteCommand("LookupMruWebService","RetrieveLookupMruData",null);$v_1.ErrorHandler=this.$Y;var$v_2=null;if($p0)$v_2=this.$t;var$v_3=$v_1.Execute($v_2);if(!$p0){if($v_3.Success){var$v_4=$v_3.ReturnValue;$v_0=this.$16_3($v_4)}}elsethis.$j_3=true;return$v_0}</Function>
>    <Function>anonymous($p0){var$v_0=this.$k_3(),$v_1=false;if(!isNullOrEmptyString($v_0)){var$v_2=$v_0.match(this.$g_3);if(!IsNull($v_2)&&$v_2.length===5){var$v_3=newDate($v_2[1]),$v_4=newDate;if(elapsedTime($v_3,$v_4)<1.8e6){this.$H_3=$v_3;$v_0=$v_2[4];$v_1=true}}}if($v_1){if(!IsNull($v_0))$v_0=this.$15_3($v_0);!IsNull($p0)&&$p0($v_0)}else{this.$e_3();if(!IsNull($p0))this.$F_3[this.$F_3.length]=$p0;$v_0=this.$1O_3(!IsNull($p0))}return$v_0}</Function>
>    <Function>anonymous(items){var$v_0=this.$B_3(null);this.$1D_3($v_0,items)}</Function>
>
>Url: https://server/_static/_controls/LookupMru/LookupMruList.js?ver=1637096040
>Line: 1
>Original function: anonymous($p0){var$v_0=null;try{$v_0=this.$k_3();if(!IsNull($p0)){var$v_1=String.format("Timestamp:Loaded={0},Updated={1},Saved={2}{3}{4}",this.$H_3.toString(),!IsNull(this.$A_3)?this.$A_3.toString():(newDate).toString(),!IsNull(this.$9_3)?this.$9_3.toStr
>Report to Watson:False

If the %AppData% folder redirection is disabled, the issue goes away.