This should just work. (And does when I try it.)
Does trace() work for Flash projects? Have you altered your mm.cfg file (if you have one -- see http://help.adobe.com/en_US/flex/using/WS2db454920e96a9e51e63e3d11c0bf69084-7fc9.html)?
The trace statement works fine when coding for flash player in adobe flash cs5. I only have a problem when coding for AIR 2.0. I have tried everything to see trace statements for AIR using Flash CS5, even on other computers it has the same issue.