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Loading local assets
In some cases, your SWF file might load assets that reside on the client's local file system. This typically happens when the Flex application is embedded on the client device and loaded from a network. If the application is allowed to access local assets, it cannot access network assets.
To ensure that a Flex application can access assets in the local sandbox, the application must be in the local-with-filesystem or local-trusted sandbox. To ensure this, you set the use-network compiler option to false when you compile the application. The default value of this option is true.
When you load another SWF file that is in the local file system into your application with a class such as SWFLoader, and you want to call methods or access properties of that SWF file, you do not need to explicitly enable cross-scripting.
If the SWF files are in different sandboxes (for example, you loaded the main SWF file into the local-with-network sandbox, but loaded the asset SWF file from the network), you cannot cross-script because they are in different sandboxes. Remote SWF files cannot load local SWF files, and vice versa.
I advise using full urls. If a full url does not work. it is a crossdomain issue.
If you want to be able to point to different urls without re-compiling, pass the url into the app from the html wrapper using flashvars.
I am testing it again and it does work fine on my XP box. I did not on my Server 2008. Will try again. Thanks