I'm moving over from .wmv files to Flash for my web video's. When encoding the .avi to Flash, do I need to:

1: Deinterlace the footage
2: Resize the clip to fit the player window or does it do this automatically?

1. Yes, by all means (unless the encoder is smart enough to do that without being instructed).
2. It depends, some players do, some don't. Generally you're better off resizing, so the player doesn't have to do it - this way YOU have the full control over quality.

You can also encode right to H.264 MP4 and just change the file extension from .mp4 to .flv. From version 9 on the Flash player supports MP4 and most seem to prefer it over Flash Video now.

As for interlaced, whenever I convert interlaced footage to MP4 it seems to automatically deinterlace the footage. I almost always shoot in 25P if I know the final destination will be on the web because I get slightly sharper video this way.