I'm guessing this is the same problem I ran into a while back but without an example I can't be sure 100%. Nevertheless I believe only Flash 5 and MX have this image distortion issue, maybe MX 2004 as well but 8 onwards should not. Anyway its got something to do with the positioning of the image on the stage or what program you use to compress the jpeg or whether its been broken apart in Flash. All I can remember doing to solve the issue is to move the picture to a different position on the stage.