I'll answer my own question in hopes that someone will benefit from it.

The app notes were confusing (to me), turns out I also needed to restart the I2C bus in read mode after I was finished writing to it.

unsigned char ADC_read(unsigned char channel)
{
unsigned char idata result = 0;

I2C_start();

if( !I2C_write(ADC_ID|WRITE) )
{
printf("Did not get an ack from PCF8591rn");
return 0;
}

if( !I2C_write(ADC_CTRL|channel) )
{
printf("Did not get an ack from PCF8591rn");
return 0;
}

I2C_start();

if ( !I2C_write(ADC_ID|READ) )
{
printf("Did not get an ack from PCF8591rn");
return 0;
}

I2C_read();
I2C_ack();

result = I2C_read();
I2C_nack();
I2C_stop();

return result;
} /* }}} */