It looks like a Flash bug. I'm running Flash Player 10,0,45,2. To clarify, I had the issue where the message appears and does not go away when using full-screen mode. The preferences window was also freezing up. I quit the browser, moved ./library/preference/macromedia folder to the trash, and restarted the browser. Problems solved.
In addition, you can go to a site with flash video, right-click on the video to bring up flash preferences, then set the disk storage to zero. I don't know the impact of this on cookies, speed, etc.
D