Well, this doesn't work the same as normal mode7 engines, because there's no rotation involved. But what is the same is that you basically have a number of independant horizontal lines (in this case thay're 4 pixels high to save some speed), and you draw into them.

(modern) Mode7 engines in flash usually use beginbitmapfill with more than 100 of sprites. You can find some examples in the forums here.

My effect just uses copypixels into one bitmap's bitmapdata to increase speed, which I can get away with because I don't have to rotate parts independantly. It's basically the same as parallax scrolling, you move the different parts at different speeds. I also did not want to scale in realtime, so my image is skewed in photoshop, ie the top part of the image is smaller than the bottom, because the top parts will scroll slower.

I can give you the code if you'd like, but it needs the rest of my scrolling engine (which you already have), and it's also a bit messy due to heavy experimentation to get it working.