Says On2: "The pairing of the On2 Live SDK for Flash with Flash Media Server 2 brings broadcast-quality video webcasting to the Flash Platform. This enables you to integrate live video feeds into any Flash application. Your applications will deliver the highest quality live video at remarkably low data rates and stream latency, creating a rich experience for your viewers while slashing your bandwidth costs."
While this is good news for some it leaves me with a bit of a sour after-taste. First of all this SDK needs to be commercially licensed. No pricing information is available on the product page which usually means it's expensive. The mere mortals amongst us are still waiting for the Java SDK that is supposedly to be released on Adobe Labs any moment now... That SDK *should* allow you to build a similar app - at least that's my interpretation. A FLV2MP3 converter has also been announced on chattyfig.
Adobe seems to have been busy behind the scenes. On2 states: "Working closely with Adobe, we've designed the On2 Live SDK for Flash to stream live video directly to Adobe's Flash Media Server 2 using Adobe's RTMP (Real Time Messaging Protocol)."
Remember RTMP is a proprietary protocol so Adobe must have shared some secrets with On2 there to make this work. I got a feeling they won't be so forthcoming with this type of information if the Red5 team asks nicely :-)
Thanks Biffcom for the heads up.

I've asked them for the ondemand sdk. That was priced at 75'000 US$.
:-(
This new "Flash 8 Live SDK" from On2 looks like the precursor to coming end-user tools and products for live encoding, which would be built from such a toolkit. But again, don't expect it free!