flowplayer - stream from file:///fodler/video.flv possible?
Flash video has problems playing from some local URLs in Windows, but it mainly has to do with network shares.  The workaround is to map the share to a drive letter.

You may also be having problems with local file access versus network resource access.  Google "flash player security restrictions" for an overview.  With the Flowplayer SWF, you are likely out of luck for working around this w/o getting users to change security settings.

The best option is to use a local web server.  With this you may even be able to get Drupal running off of your memory stick.  There are several options, but I have had good luck with Server2Go.  I have never used it with Drupal, though.