ios app for iPhone 5. Loops through main timeline with AIR 3.5

I am making a game for iOS with a resolutuion of 1136x640 for the iPhone 5.

I used AIR 3.4 to publish the .ipa. I submitted the binary to apple with application loader and after it finshed I got this message:

Invalid Launch Image - Your app contains a launch image with a size modifier that is only supported for apps built with the iOS 6.0 SDK or later.

I read I could use AIR 3.5 or change the adt.jar file for 3.4 but doing both of these things causes a problem with the way my app runs.

If I do either of these things, this is what happens:

when I come to test the ipa on my iPhone the app just loops through the main timeline like crazy. If I switch back to AIR 3.4, it's all fine and the game works normally.

What is causing this problem?

Also if my stage is set to 1136x640, how do I get it to only display appropriately for the 960x640 devices?

I am doing the following to achieve this:

this.stage.scaleMode = StageScaleMode.NO_SCALE;

this.stage.align = StageAlign.TOP_LEFT;

and just having my content of the left side of the stage. On the iPhone 5 you see an extra 176 pixels on the right. Is there a better way? Could this be causing the problem with AIR 3.5?

Thank you.