Found out that if you want to server up images in a secured Flash application in IE, is a pain. Firefox and Chrome no issue.
It says that "The problem occurs if the server is using Secure Sockets Layer (SSL) and has added one or both of the following HTTP headers to the response message:"
This speaks about office documents, but also applies to active x objects, ie Flash.
So, if you response header is returning any of the following, will cause issues.
Pragma: no-cache Cache-control: no-cache,max-age=0,must-revalidate, no-store
You can see this in Fiddler ( you have to check decrypt ssl).
Solution:
Check you web.config make sure you are not caching anything. This sucks for server performance, but will allow the application to work. We also found out that Flash will utilize IE's caching, which benifits the user.
If you still see any of the above in the response header, check the server. IIS has caching settings, clear these out.
After all this is done, the application will server images in Flash, in IE over SSL.
The upseting thing, Microsoft says that "This behavior is by design."
At least I learned something new.