You can try going into the bitmap properties and select "Allow Smoothing" to see if that helps (right click the image in the library and select Properties).
One other way that should not impact the image is to create a rectangular movieclip that you apply the shadow to, size it for the image, and place the image on top of it.
Another thing you may also do is trying to trace the image(use the " Trace Bitmap " option in Flash). Once the image becomes a Vectorial object(make sure to play around with the values for color threshold, minimum pixel area etc to get the best results) you may want to use the drop shadow effect.
Let me know how it goes,
Thanks Ned. I actually changed some import settings in Flash to import the ai files as Movie clips and i think this helped resolve the issue.