Just to get some professional opinions, is it possible to load in an external SWF and set that SWF's background to transparent?
This question has nothing to do with embedding the SWF in an HTML page. I already know that setting the WMODE to transparent will create a SWF with a transparent background in a browser.
I don't believe that there is. Assuming that I understood your question right, the stage's background cannot be transparent as the color picker in CS4 for it doesn't have the alpha, and I doubt you could do it with code if you couldn't there.
Assuming you are talking about loading swfs inside swfs:
The background color property is only used when you open the swf inside the standalone player. Inside the browser, you can set this property via swfobject (other embed methods are available), other wise it is always transparent. In fact, in the compile options it is called 'default-background-color', not 'background-color', I think they should update this in the Flash IDE to be clearer...
I would recommend drawing or placing a graphic with the desired background color just underneath the loaded swf.
Hope this helps you