1) Method 2 requires you to upload the flash (swf) file outside of CSB. Either use FTP software or upload in another way. Sign into your host and look around for the features they offer you. Each host is different but most web hosts have a file manager or some control panel that allows you to upload a file to your website. Usually it is only one or two files at a time. Not practical for publishing several pages, but it's just fine for uploading movies, flash, sound, etc. Files like that just add weight and slow down the CSB file. It is more practical to upload them in a different way rather than depend on CSB. Also makes it very easy to update that file if you need to. Code stays same in CSB, just replace the file with another one of the same name!
FTP software is VERY EASY to use. If you can use Windows Explorer to look at your My Documents folder (to see the files and folders) then you can use an FTP software. COREFTP has a lovely free FTP software. There are others too. The very basic functions of all of them allow you to see YOUR computer on one side of the screen, and the website computer on the other.
[I have some information about FTP software in general and a few screen shots but maybe I should make a specific tutorial for CoreFTP to help folks get started.] Can be very intimidating, but really is not difficult at all to use the basic functions!
2) Well. The ability to use CSB is a totally separate issue. CSB works now and will work for a while longer but for how long??
Please read this thread for further discussion on THAT topic.