The ConvolutionFilter available in Flash 8...

combines pixel data in a bitmap with data from neighboring pixels to produce a given result. Having control at the pixel level allows you to produce a wide array of effects on a bitmap. These include things like blurring, beveling, embossing, sharpening, and more. All are possible using ConvolutionFilter. Link

You can use the ConvolutionFilter to create fire, smoke and liquid effects.

If you want transparent effects, make sure the 'BitmapData' object to which you apply effects is transparent:

bitmapData = new flash.display.BitmapData(390, 390, true, 0);

Once the object is transparent (i.e. has an alpha) another important point is when "drawing" on the bitmap make sure you use the setPixel32 so the alpha is maintained. For example:

var color:Number= parseInt("0x000000", 16) + 0xFF000000
bitmapData.setPixel32(drawingPosX, drawingPosY, color )