General discussion regarding using video

Ok I have a windows media file at 1.49mb

When you import it to Flash it gives you the options of compression.
Ie; 56kb, 128, 512 etc.

Setting it to 56kb gives you a 800kb .swf that is pixilated as hell.
Setting it to 128kb gives you a 2.5mb .swf with some pixilation
Setting it to 512kb it is 4.5mb

I believe that you can run the file directly from it’s location without embedding it in the .swf which would resolve the problems with compression and pixilation.

However I have control buttons (play,stop,pause) and a time bar. If I don’t embed the video. I don’t see how I can have control over it ?

So what is the best way of handling video in Flash ?