its an old praystation/firstborn trick.
Go to http://www.firstbornmultimedia.com and in their portfolio, look for a client named Yigal Azrouel (fashion designer). Check out their archived versions of his site.
Can you see that same cool masking effect?
Now checkout http://www.praystation.com. He has a bunch of flash code in his archives. You have to go to his really work, and you should be able to find a little piece he did with duplicating MC’s that follow the mouse.
Its really interesting to see how you can put something pretty nice without re-inventing the wheel.
good luck!
Shaheeb