Your processor is momentarily saturated. It's not really a 'defect' that is covered under warranty.
Flash is a widely-known resource hog. It's one of the reasons that Steve Jobs has 'banished' Flash from iPhones and the new iPad, and uses H.264 format video.
Have you also noticed that the fan becomes loud when this is happening? Almost any time the fan starts running at high speed, it's because your processor is working hard and needs additional cooling.
If you look at Activity Monitor when the stuttering occurs, you probably have a combined CPU utilization of the top two or three processes running of more than 100%.
It's also quite possible that the Free memory 'green slice' of the of the System Memory pie chart is quite tiny.
Work-Arounds
1. Run fewer processes/programs. Close and Quit every application that doesn't need to be running while you're watching Flash.
2. Try another browser. Some are better than others at running Flash. I use Safari primarily, but Firefox, Google Chrome, and Opera are also available.
3. Add RAM memory, especially if you still have just 1Gb RAM memory installed. Upgrading to 2Gb or 4Gb (MacBook 2,1 actually only recognizes and utilizes up to 3Gb) will help somewhat. It doesn't cure the processor saturation, but it does give the programs running more 'breathing room' until it reaches the saturation point.
4. ClickToFlash gives you options for how Flash is handled. Free download here -->
http://rentzsch.github.com/clicktoflash/
5. H.264 format videos may be less processor intensive.
6. Buy a new Mac with a faster processor and more RAM. Even a 2.26Ghz MacBook Pro does much better than the 2007 2.16, because it uses a low power microprocessor, has 2Gb RAM standard, has a more advanced video chipset, and an unibody aluminum case to help dissipate heat.