First, we convert the VMware avi (VMnc format) to the Microsoft avi format.
mencoder -of avi -ovc lavc movie.avi -o movie2.avi
Next, we convert the Microsoft avi format to FLV format.
ffmpeg -i movie2.avi -r 12 -b 100 movie.flv
You can play around with the -r switch (rate per second) and the -b switch (bitrate). But, if those get larger, so does your FLV file.