Hi there, my guess is that you're just getting a range of answers on it which makes things sound complicated. I'll try to answer the best I can, its not too terribly complicated, but depends on what you understand about the ways of the web.
1. No, an FLV is simply a specific video format for Flash. One can use streaming servers, or just a regular HTTP server. By the way, streaming services are most useful for when you have a live event to show to hundreds of viewers at once, prerecorded videos are easily served either way so long as you have bandwidth. And streaming services are expensive in comparison. Flash plays the video as it gets it, and if it misses a piece its gone, like if you lose your cable.
2. Streaming is one of those words that gets thrown around, and sometimes its real meaning is mixed. True streaming is like a tv signal, it goes out and anyone who can catch it sees it. The other sense is more of a file streaming, which is really just a file being loaded at least as fast as the speed of the playing video. Often you have a small buffer as well, 10 seconds or so, in case the internet speed changes. If you watch a video on YouTube, it preloads this way. Flash handles the video like any other file, so if it misses a piece, it waits and tries to get the rest of it, like if your DVD freezes for a moment.
3. A normal FLV comes as just a video file, and when Flash loads it, it knows the overall size of the loading and what percentage has been loaded. From that you can determine the loading. You have the ability with some video creation software to mark frames, I think called cue points. The idea is then you could skip around the file like DVD chapters, to these specific cue points. Progressive downloading just means that you can play it before it fully downloads, so it loads from start to finish.
4. I'm not sure exactly what your question is here, but you can easily make video controls to integrate with Flash, and all kinds of things. I suggest going to www.gotoandlearn.com
for excellent video tutorials on creating video controls for Flash.
Trust me, I've been there with Flash. I'm still learning the differences between AS2 and AS3, and have hit my head over some seemingly simple details in the end.