This little process, a total of two lines, took way to long to figure out.

First, we convert the VMware avi (VMnc format) to the Microsoft avi format.

 mencoder -of avi -ovc lavc movie.avi -o movie2.avi 

Next, we convert the Microsoft avi format to FLV format.

 ffmpeg -i movie2.avi -r 12  -b 100 movie.flv 

You can play around with the -r switch (rate per second) and the -b switch (bitrate). But, if those get larger, so does your FLV file.