This is a domain issue.
The reason you see conflicting reports and advice is that this issue has changed with each release of Flash. The local security sandbox became more restricted with each release.
In Short, Adobe stopped local .swf files from accessing data on a user's drive unless the user specifically allowed the access. Projector files have their own exceptions and freedom in this regard.
This, as you have found out, can be quite annoying while working on your development machine.
There is a solution. The solution is to add your local project folder to your list of trusted data sources.
Open Flash a SWF in your browser.
Right click on the Flash and Choose Settings.
Now Choose the Advanced Button.
This brings you to a special web page which contains a set of options for customizing your Flash player.
Choose the Global Security Settings option in the left navigation.
Now Choose the Edit Location combo box.
Now Choose Add location... from the menu in the combo box.
Then Choose Browse For Folder.
In the Windows Dialog that opens, find the folder where your swf assets reside that you'd like to load into your swf file and select ok.
That's it. Your SWF should now be able to access the swfs and any assets that reside in that local folder.
Adobe has more information at