FLV supports transparency so I've found this sort of issue to be a codecs conversion glitch in the alpha channel department.
Although I'm curious why you're taking a SWF, converting to video and then reimporting into flash when you could just display the SWF itself. Is the performance of the SWF poor? Are you using fonts/etc a user might not have?
Have you tried importing the SWF you want to convert into video directly into flash and using File->Export->Export Movie to create the movie? Then you can create a standard uncompressed movie (e.g. Quicktime Animation Millions+ Alpha) and convert it to a MP4 which would play better, unless FLV is required for some reason.
Thanks for the feedback. I want it as flv to make the timeline look clean. There is a lot of tweens and such and just preferred to have an flv movie on 1 layer.
I just do not understand why a format of adobe designed to import to flash does not work. This is a big problem and there must be something going wrong. When i look at previews in library it looks scrambled. I never had such a problem in the past?
The SWF->Video converter is most certainly at fault for your issues. That's why I feel you should either use ActionScript to import the SWF to play it or import it once into a new document and export it as a video directly from flash. I've used FLV for a very long time and I've seen plenty of issues. It is no easy task to convert a SWF to a video. I think it makes more sense to let Adobe do the work it's designed to do.