As I finish writing this I realise that both circuits are being powered from the same 5.5V supply; could this be the problem?
After a while LED flickers on for a short period and then goes off
drawn by a total idiot
doesn't really add value to the discussion
I can't see anything in the datasheet suggesting it has a high-pass filter function. It shows a bandpass filter for the specified frequency, 38 kHz in this case, but no low-pass filter.It does show an AGC function which may cause the behaviour indicated.
Suitable burst length ≥10 cycles/burst