new LoaderContext( true, ApplicationDomain.currentDomain, SecurityDomain.currentDomain );
But something wasn't right. I installed Fiddler, which is a super handy tool for debugging in IE, since FireBug is only available for FireFox. We found that IE was making the request for crossdomain.xml, but the server it was requesting from was the name of the media file, and not the actual server. After a bit of poking around we found that the CMS we were using was automatically formatting the Flash embed code, and was adding this:
<param value="" name="base">
This simple embed param caused the super weird behavior, only in IE. Hopefully this may be helpful to someone who runs into the same issue. Yay IE!