It's more that the game feels unresponsive, pressing left or right takes a few seconds for the character to move, and when there are many enemies on screen you can't move him at all.
It's something to do with CPU usage, on my core i7 flash is using 90% CPU.
Maybe you have to look at how often you're updating the screen, I'm not very familiar with ActionScript but it feels like there's a constant loop running as fast as it can, is it possible to use an event based system to update the screen instead?
-- well yeah, its a cpu thing, we may need to lower the kb size on the imgs that made up the sprites, and less fps I guess... we need to do more optimization...