1 - You probably want a little xml file that lists out the images and the order you want to use, along with the transition and hold times.

2 - Use a timer to trigger the transitions - when you mouse over, just pause the timer; when you mouse out, start it back up.

3 - Take a look at TweenLite - it will handle the crossfades for you really easily.

4 - Supposing your users can get back to the homepage, you probably want to keep the slideshow around, just turn it invisible or call removeChild to get it out of the display list.

5 - Throw this on stage underneath everything - as soon as an image loads you'll never see it again.