How can I prevent pinlabel/postscript errors?

I would like to ask for help with an error caused by some interaction between the pinlabel package and (it seems) Adobe Illustrator CS2. I will describe the situation below; my question simply put is: what can I do to prevent this error from occurring? A similar situation was described before on this site, but did not contain a question. I hope my question is direct enough, and I appreciate any help that is offered.

My setup: Mac OS 10.7.5; TexShop 2.47; pinlabel.sty v 1.2; Adobe Illustrator CS6 (version 16.0).

The problem: When I use pinlabel with an eps file created by Illustrator, I get the error message

! Text line contains an invalid character.
^^@^^@XÊ^^F^^@^^@^^@^^@^^@^^@^^@^^@^^@xÊ^^F^^@B    ^^@^^@ˇˇ^^@...
l.165 \includegraphics{test}

Some remarks: If I simply hit return in response to the error message (or q for batch mode) then the file will eventually process. If I use pinlabel with an eps file created in another application, I have no problem. If I use the same graphics file without the pinlabel commands, there are again no error messages. So I assume that the issue is an interaction between some pinlabel commands and the eps file produced by Illustrator.

A sample LaTeX file that produces this error is reproduced below. There are 3 versions, showing the 3 behaviors referred to in the preceding paragraph. The eps files that are needed are in the directory http://people.brandeis.edu/~ruberman/pinquestion/ along with the LaTeX source and the log file from my session.

%%%%%%% Sample latex code %%%%%%%

\documentclass[11pt,reqno]{amsart}
\usepackage{amscd,graphicx}
\usepackage{pinlabel}

\newcommand{\M}{\mathcal M}

\begin{document}

\begin{figure}[h]
\begin{center}
\labellist
\normalsize\hair 0mm
\pinlabel {$\M(X,g_t,\beta_t)$} at 83 15
\endlabellist
\includegraphics{fig1}
\end{center}
\caption{The figure from another drawing program, with pinlabel commands}
\label{fig:param1}
\end{figure}

\begin{figure}[h]
\begin{center}
\includegraphics{param1}
\end{center}
\caption{The figure produced by Illustrator, without pinlabel commands}
\label{fig:param1}
\end{figure}

\begin{figure}[h]
\begin{center}
\labellist
\normalsize\hair 0mm
\pinlabel {$\M(X,g_t,\beta_t)$} at 83 15
\endlabellist
\includegraphics{param1}
\end{center}
\caption{The figure produced by Illustrator, with pinlabel commands}
\label{fig:param1}
\end{figure}

\end{document}
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Welcome to TeX.sx! A tip: If you indent lines by 4 spaces or enclose words in backticks `, they'll be marked as code, as can be seen in my edit. You can also highlight the code and click the "code" button (with "{}" on it). –  Torbjørn T. Jan 4 '13 at 19:11
Thanks for the tip(s); I'll try that next time. –  Danny Jan 4 '13 at 19:16