1.) I could have sworn i've seen this, but I can't find anything about it... can you have a custom canvas for flash that isn't rectangular?

2.) If i can't do that, I need to do the following:
- On this site http://www.chastagi.com/testing.html , I need the bottom left rotating flash panel to conform to the layout of the site (so that it isn't just a rectangle). Do I need to use masks to do that? The flash has to be transparent to the site still but I want ads to conform to the contours of that "section" I have.

Any tips are appreciated, Thanks.

Yeah masking would help. I could help you out if you wanted, just pm me and ill make a plan for you.