You can trick Flash into thinking it works and not have to bother allowing that content from the pop-up. This will also remove and prevent any persistent Flash cookies (Local Shared Objects.)
As far as I can tell all sites employing Flash will continue to function properly. I haven't encountered any problems playing Flash content and all that crap is permanently denied.
First, to get a new, clean folder, start by trashing the Macromedia folder in ~/Library/Preferences. That's in your user Library. Next, do not visit the local Flash Pref Pane in Sys Prefs. Instead, go directly to Adobe Global Privacy settings in the Adobe Settings Manager and set Camera and Mic to "Always deny." Visiting the Settings Manager will automatically create a new, clean Macromedia folder.
(If you first visit the local Flash Pref Pane, the new Macromedia folder will lack the empty default #shared objects folder and its also empty enclosed folder (this is the one with a combination of characters and numerals.) I haven't tested to see what will happen if those two folders are not present. I assume, providing the Macromedia folder is unlocked, they would be created as soon as one visits a Flash site, but they will not be empty and this would defeat the entire purpose.)
If you visit the local Flash Pref Pane now, all the defaults will remain, except for the Camera and Mic panel, where "Always deny" will be checked. Next, it seems prudent to go to the Playback panel and check "Block all sites from using peer assisted networking." But, important, in the Storage panel, you must leave the default "Allow sites to save...." checked. This is how sites using Flash are tricked into thinking storage of Flash Cookies is being allowed when they are, in fact, not.
Next, go back to the Macromedia Folder and, using GetInfo/CMD-I, recursively lock all its enclosed folders. This means starting from the back working ones way up to the front. And, finally, lock the enclosing Macromedia folder itself. Nothing gets stored and everything keeps on working.
(Thanks to Anon at XYMer's for this.)