I did a job a while back where the client wanted something very similar.. he wanted to display a youtube video on his website with a cover over it, and when the user clicked the "cover" a popup window displayed.
I did this by streaming the youtube video into the flash file and placing a layer over it. You could do the same, and just have a "frame" in the style of an old tv overlapping the swf file playing in the background. Only problem I forsee is not covering up the controls to pause and restart the video.
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