Still trying to figure out an issue that has me baffled, although I do keep coming up with new ways to describe the issue. What's happening is this: I'm getting padding OUTSIDE of the application container when I view my flex application in IE running under Windows 7. Any other browser/OS combo is fine - looks normal with no extra padding.
In the example below I've made the application container 1px smaller on each side so you can see the padding appearing outside the application container's scrollbars.
This will (as far as I can tell) look normal to you unless you are using IE in Win7: