Pbartender said:
Threatened area is not the same as reach.
The way it is being used in this context, it is. They state that your ability to attack others is limited. The way that they limit it is to forbid you to threaten any squares - thus removing the existence of any squares into which you can make a melee attack.
Compare the text for reach weapons with the text for big and small creatures in combat:
A reach weapon is a melee weapon that allows its wielder to strike at targets that aren’t adjacent to him or her. Most reach double the wielder’s natural reach, meaning that a typical Small or Medium wielder of such a weapon can attack a creature 10 feet away, but not a creature in an adjacent square.
and
Creatures that take up more than 1 square typically have a natural reach of 10 feet or more, meaning that they can reach targets even if they aren’t in adjacent squares.
Unlike when someone uses a reach weapon, a creature with greater than normal natural reach (more than 5 feet) still threatens squares adjacent to it. A creature with greater than normal natural reach usually gets an attack of opportunity against you if you approach it, because you must enter and move within the range of its reach before you can attack it. (This attack of opportunity is not provoked if you take a 5-foot step.)
Someone with a reach weapon: Has doubled reach - 10 feet - which means can strike 10 feet, cannot strike 5 feet.
Large creature: Has 10 feet of reach. Can strike 10 feet, and threatens adjacent squares.
Now, we know that 10 feet of reach means "can strike 10 feet, cannot strike 5 feet" from the reach weapon description, and we know from the big and little text that the Large creature threatens adjacent squares. If we're drawing a demarcation between the definition of 'ability to attack' and 'ability to make an AoO', though, the fact that the Large creature threatens adjacent squares doesn't remove the prohibition that 10 feet of reach forbids striking adjacent creatures. He threatens them, he just can't hit them.
But it's clear that by "still threatens adjacent squares", the Large creature gains the ability to make an AoO into adjacent squares,
and also to strike into those squares. The term 'threaten' covers both AoOs, and ability to attack.
The grappling creature loses his ability to threaten squares - he cannot make AoOs, not may he attack.
Consider the phrase "your next action". At times, this is used to mean "the next time you take a free/move/standard action". At other times, it is used to mean "your next turn in the initiative order". It's necessary to consider context to determine which is meant.
Similarly, the way 'you don't threaten' is used with respect to unarmed strikes and whip is less restrictive than how it is used with respect to grappling. We know from other parts of the rules that the grappler may not attack non-grappling opponents; the only rules text that actually imposes this limitation is "You threaten no squares while grappling". In the grpapling context, "You threaten no squares" prevents you attacking at all into those squares. In the unarmed strike context, "You threaten no squares" prevents you making AoOs.
-Hyp.