Wow! Thanks for getting back to me. I imported directly into the timeline by File>Import>Import Video and then selecting the .flv file to import.

First off... I had no idea you could turn on smoothing on a video. I still am not quite sure how to do this. I don't see a smoothing selection in the parameters or the components window. But if this is possible, I think it would solve all my problems as the image quality has a similar craggy look (especially when it comes to text being shown on screen) as a jpg without "smoothing" being enabled.

I would appreciate any and all input on flash video as I do not work with it much but am finding myself working with it more and more now.