Hello,
by any chance, do you have that flash on-line, co that we could see it and test further? Are there any errors or simply nothing is being shown?
In fact, the embed tag is obsolete, that's why we don't use it in the flash webpart. The object itself should be enough to show the flash properly. Please try to find out on the Internet possible ways of displaying flash in IE7 using the object itself.
If you want to, you can
clone the original flash webpart and change the final HTML code which is rendered in its code-behind:
~\CMSWebParts\Media\Flash.ascx.cs.
Best regards
Ondrej Vasil