Remember that MSN messenger demo I used to work on? With the Messenger Live API. Their API had quite a similar thing where all the communication between MSFT servers were handled through a flash object they were injecting into the website. MSFT Live branded buttons weren’t looking really like our site and was taking too much space so I display:none’d their flash object (just like you did).

I spent quite a long time blaming MSFT APIs for not working properly. I was really ashamed of myself when I figured the problem was with my code actually. Turns out, browsers generally stop letting flash objects communicate when you remove them from the document. Setting its height to 0px solved the problem for me then Quite similar to yours.

So it’s not only the YUI uploader flash but a common thing with Flash.