Never mind. Figured it out, though in possibly different from the paper. 
Principle of optimality to the rescue! :)
O(n^2)

DP equations:
LAP[i, j] = Longest AP in range [i,j] of the sequence

LAP[0, j] = max{LAP[0, k] (for all k in range [0, j-1]) extended with a[j],1 
(the element a[j] itself)}
Result in LAP[0,n-1]

Make sure LAP maintains information about last element and common 
difference.
(The simple cubic DP can be reduced to N^2 by observing that LAP[i,j] is 
essentially the same as LAP[0, j] by principle of optimality as the result 
needs to be calculated with start index 0).

@Sunny: Any bugs in the analysis?

--
DK

http://twitter.com/divyekapoor
http://www.divye.in

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