Ok…this was boggling for a minute but thanks to my good buddies Google and the public Flex bug system I found the problem. It was a tough search so I figured I’d post here to help.
“Error while loading initial content” when trying to Debug and imported 3.0.1 AIR project
Changing the namespace from 1.0 to 1.5 fixes this issue.
You can read the full issue on the Flex bug list.