Well I found out the hard way today that this is not actually possible - you don't embed the .flv file (extension means Flash Video) - you embed a Flash player, that references the flv file. Semantics - but important ones.
You have probably seen the "skin" of the JW FLV Media Player all over the web with good reason: it is cheap (free for personal use) and it works.
The code is pretty simple once you have JW FLV Media Player installed (note that I am using the "embed" code here taken from their wizard and not the javascript - this is because a lot of blog and CMS systems may add line breaks or other funky characters to code like this):
<embed src="http://ibizdaily.com/player.swf" width="328" height="200" bgcolor="#ffffff" allowscriptaccess="always" allowfullscreen="true" flashvars="file=http://ibizdaily.com/video.flv" />
And voila:
And there are lots of options (size, full screen, etc.). One caveat - if you are using IIS you may have to add the mime type .flv to the server configuration. That one almost killed me today :)
I also needed to use the full URL to get this to work - not a relative path.

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