I've created a custom Web Part dedicated to displaying swf content. It uses swfobject and jquery to serve and display the flash file.
If the SWF is placed in a Document Library (/Documents/test.swf), the flash file will not load. It appears that the size (width and height) is detected, but the flash file doesn't load or play.
Alternatively, if the SWF is served from the file system (/_CONTROLTEMPLATES/FlashTest/test.swf) OR from an external site the flash serves, displays, loads and plays just fine.
I have turned on Permissive Browser File Handling for the Web Application with no effect.