"Is the application using a different isolation level than you are using via Query Analyser e.g. READ UNCOMMITTED as opposed to READ COMMITTED?"

This is normal in any development environment,...

Is the query captured from sql profiler part of a stored procedure?

No.

"If so have you captured the execution plan for this procedure from sql profiler and compared it to the...

Yes. It is the same query that is being run in the application.

Login user has normal select privileges. No update privileges or anything.

Infact the query was captured from SQL Profiler...