Take a look at SWiSH ... http://www.swishzone.com/ ... it's not free, but it's not expensive either. It's a nifty little program that lets you create flash files and it imports/exports .avi files.
I am an avid Swish user myself, but it wont do video encodes to flash, it is for building websites. Goto to www.wildform.com and grab Flix, as it is the best and cheapest app for encoding a video(avi or quicktime) into a SWF video file. Check it out!