I have linked and embedded SWF files in my Director project.
They play and publish just fine. My problem is that when I scrub
the timeline I would like to see the SWF frames. Is there a setting
where I can scrub through the SWF and see it update?
If you mean that you have your .swf extended along the
Director score, then no. The Flash .swf plays through Director
using the Flash Xtra. That xtra is not running while you are moving
the playback head in the score.