Well - finally figured it out. To set the height of the loaded web page so the scroll bars were correct - I did this:
if(browserInsideFlex.htmlLoader.window.document.body.clientHeight) // make sure this is not null (which can be at the start)
if (browserInsideFlex.htmlLoader.window.document.body.clientHeight > Number(arrOfParms))
browserInsideFlex.height = browserInsideFlex.htmlLoader.window.document.body.clientHeight;
browserInsideFlex.height = Number(arrOfParms);
the "browserInsideFlex" is the ID of an <mx:HTML> and the "Number(arrOfParms)" is the height of the AIR program loaded HTML page (which is our case is dynamic - the height changes based on a call to the AIR program).
the "browserInsideFlex.htmlLoader.window.document.body.clientHeight" is the actual/real height of the loaded web page (the web page that was loaded while the user was interacting with the page that this program loaded previously by the AIR program).
Hope this helps someone - it took a while to determine the 2 keys - "browserInsideFlex.htmlLoader.window.document.body.clientHeight" and "browserInsideFlex.height".
The above code is in the HTML_RENDER event handler (browserInsideFlex.addEventListener(Event.HTML_RENDER, onHTMLrender);)