Good concept - shows real promise
nice concept, but it's buggy as hell. You could probably use an expert actionscripter to help you.
Some little things:
1) many of the text pop-ups are cropped; remember that system text often doesn't display the same in a published movie as it does inside the Flash development environment. You should always leave some breathing room, or space for an extra carriage return. If you are using multiline boxes, I recommend setting a line spacing of 0px to compenstate for the extra kerning allowance when the movie is published. It might also help to put a translucent box behind the text pop-ups so the text is always readable.
2) I love what you did with the scaling and movement of the character. really cool - however, there are some glitches in hot spots and encounters with other characters which make it impossible to move out of the hot spot. (there's a glitch in front of the counter in the Scud shop). Can't tell without looking at the code why this is.
3) more environmental sound would be a big help to playability. Right now there are some cases where it's hard to tell if an interaction has completed or not.
4) directional control is workable, but not as playable as it could be - especially since you find yourself switching from keyboard control to the mouse and back again when using the inventory. In addition to setting up listeners for the directional keys, it would be great if you wrote a mouse handler that would use onMouseMove to do the same thing, and give users a choice I realize that this would be tricky if the result is that the character sprite has to move in two directions at once, (eg: right and down); but there are ways of handling this.
5) interface for conversation is annoying and could perhaps be improved.
The only reason I bring these things up is that this game is actually worth polishing, unlike about 90% of the submissions here.