if i were to start a music video ' youtube ' type site. would i have any legal problems since it is only flash videos ?
The video format has no bearing on the legality of the site. If people are uploading copies of copyrighted videos or using copyrighted music they do not have permission to use to make their own videos, then you might get in trouble.
They follow the guidelines of the DMCA. They do not upload videos themselves. They respond quickly to take down notices. They do not encourage the upload of infringing material. They have a registered copyright complaint agent, among others. Even that has not stopped them from being sued.
I also run a video/music community site... but if I have a place where they can report it to me so i can delete the video/music, would I still get sued...?
It is possible, but not likely. The most probable thing would be they would send a C&D or takedown notice. Small sites rarely have enough revenue to make suing worthwhile. YouTube has money, hence they get sued. However, it is still possible. Would they win under DMCA, who knows. YouTube and the like have been quick to settle so that part of the DMCA does not get tested more in court.
You can get sued for one visitor if that visitor is the copyright holder. 10000 visitors is not very many.