This thread, post 58-not the op! (posted be killbynature) is what fixed my sound/no picture for on line flash videos a few months ago...am on 10.3 now, faux's aosp without issues...just out of curiosity, which cm7 are you on?
I have a similar - but worse - problem. I cannot watch online videos (e.g. from YouTube), but I can also not watch videos that I have stored locally on the SD card. I both cases I can hear the sound but no video is shown.
Installing Flash 10.1 did neither solve the online video nor the local video problem :(