I am not sure how to explain it but as far as I know <embed> was a tag created by macromedia and hence as you know it is not valid code by the standards. You actually dont need the embed tag to have flash on your site. If you use the object tag and spefify the mimetype in that tag: type="application/x-shockwave-flash" your code will be valid. However there is a slight problem with this that will almost guarentee you will prefer to use embed... That is that preloaders in flash are pretty much pointless and the flash loads as if it is a broken image without the embed tag.

I havent had a look at Alistapart but I am assuming the javascript method you are talking about is creating a function to display the flash then when code is checked in the validator it appears valid. Generally this is a pretty good way of doing things any way because you can script functions to check if the user has flash installed and deal with it appropriately etc. However this does not mean the code is valid it is just that the code is not being passed through the validator.

I think this is the one exception you should make for validation at this stage though as the embed tag works fine in all browsers at this stage and it is not that hard to change if browsers decide to stop interperating the embed tag in the future.