Thanks Carl for the fast reply.
I create the BlitMask after the mc is populated however changing the update function in my mouseMoveHandler to
objApp.blitMask.update(null,true);
does resolve the issue. However the scrolling content now seems very jittery/sluggish on the iPad (testing on an iPad2) (the app I am creating is for iPad only). Note the content is only 4 paragraphs of text and 4 images (each image is 400 pixels by 300 pixels)
I tried just calling
objApp.blitMask.update(null,true);
after I create the BlitMask but with just this, the images were still disappearing. Not sure why it should work with the manually created movie clip with the same content and not requiring the extra update parameters but not the dynamically created one.