I hope I am talking about the same problem: after updating to Safari 5.1, Adobe Reader 10 and Lion I have also lost the ability to view PDFs directly in Safari.
As soon as I found out that the Adobe Plugin officially doesn't work with Safari 5.1 the solution was quickly found and it works for me perfectly:
1. I have removed all Adobe PlugIns from the "Internet Plugins" folder.
2. In User/Library/Preferences I have opened the file com.apple.Safari.plist - you can do it either with X-Code (under Lion) or with Pref Setter (it's free).
3. In this file under "User preferences" I have found the setting "WebKitOmitPDFSupport" and changed the value from "true (YES)" to "false (NO)".
4. I then saved the changed file, restarted Safari and found out that its built-in PDF viewer works like a charm and is much quicker than my Adobe Plugin ever was!
Hope it works for you as well!
(Safari 5.1.5 under Lion and under Snow Leopard)