I know it is possible. I have seen it a couple of times, but it always struck me with: "how did they pull this off?". Those images that build up while loading, it's some kind of progressive image loading. It starts out with a low res version, and then a slightly higher res, and then slightly higher until full quality is loaded. Would anyone know how to do this?
You probably just want to use an image saved as a progressive JPEG. It's up to the image display to show the image as each pass is rendered, however, and I'm not sure if Flash does this, or waits until the completed image is ready.
While progressive jpgs now display in flash (up until fp 8 or 9 they didn't, I can't quite remember which version), I don't believe they actually load progressively. There are some solutions out there for faking it, you can always load and resize smaller images, but that's not very efficient.
Ted on flex has another solution to display an image as it loads, but it's not exactly what you're looking for.
http://www.onflex.org/ted/2007/12/progressive-image-loading-with.php
I've never done this myself but I'd probably just take 6-7 different resolution versions of the image and alpha-tween them on top of each other. In other words have the lowest res version tween from 0%-100% alpha and then have the next lowest res version tween in on top of that etc, etc.
You might need to manipulate the images in photoshop beforehand to get the effect you want.