Is integrating Adsense on a Flash site against TOS? I want to put it right on top of the flash contents. Probably Leaderboard. This is Jinxbox Desktop codename: DICE http://www.jinxbox.com/desktop
TOS related to content hence content of your flash is the key not the type of files published and flash = bad SEO idea unless you add real content flash = bad $ but your free choice
I prefer to embed flash with SWFObject. It allows to have text content on the site and makes it more SEO-friendly. Without text content it will be problematic for AdSense to determine the page subject and AFAIK it is not allowed.
AdSense TOS states that you will not use images to mislead or draw clicks to the ads. So, best make sure that you are in good faith about that. Something else to maybe consider, at least it has been occuring to me recently, AdSense uses the text on the page (and definitely the domain name/file name!) to determine what ads to display. If a page is based on embedded objects, javascript, and such, AdSense probably will not know what to show. IMHO.