you need to use fscommand for communication from VB to flash . Here is a tutorial for that

http://pages.cpsc.ucalgary.ca/~saul/vb_examples/tutorial12/index.html

external interface is used for interaction of flash when embedded in flash. In case you have embedded your flash file in VB or C# application you can use fscommand for bidirectional communication between your application and flash file. See this example

http://www.codeproject.com/KB/cs/fscommand.aspx

First of all, thank you very much for answering but I am not satisfied with the answers/links provided because I am using actionscript 3.0 (as I had mentioned in my question) but both links refer to actionscript 2.0 so they are not of much use to me. I have read that we cannot use setvariable as one of the link suggests. Can someone show a sample script where the visual basic application can pass CD drive letter to swf file (actionscript 3.0) or how to call a function in swf file from visual basic application. Thanks

I have managed to call a function in visual basic application from flash using fscommand as well as externalInterface, but I am still facing 2 problems:
1) while calling a function using externalinterface, I am able to call the function in visual basic only once (not every time I click on flash button which it should), could someone further improve this code so that I get the function called everytime I click? and
2) I am not able to call a function in flash from visual basic, can someone write working sample code in actionscript 3?
I am inserting the codes. Thanks

Insert Code here
1) Externalinterface code: code in flash file is as follows:

exInt_btn.addEventListener(MouseEvent.CLICK, flashtoVB);

function flashtoVB(event:MouseEvent):void
{
ExternalInterface.call("vbFunction");

}

visual basic code:
Private Sub AxShockwaveFlash1_vbFunction(ByVal sender As System.Object, ByVal e As System.EventArgs) Handles AxShockwaveFlash1.Enter

MsgBox("function called from flash")

End Sub
COULD SOMEONE IMPROVE THIS CODE SO THAT IT IS CALLED EVERYTIME THE FUNCTION IS CALLED/EVERYTIME THE BUTTON IN FLASH IS CLICKED?


2) fscommand example:

exit_btn.addEventListener(MouseEvent.CLICK, closeProjector);

function closeProjector(event:MouseEvent):void
{
fscommand("exit", "ok");

Private Sub AxShockwaveFlash1_FSCommand(ByVal sender As Object, ByVal e As AxShockwaveFlashObjects._IShockwaveFlashEvents_FSCommandEvent) Handles AxShockwaveFlash1.FSCommand
If e.command = "exit" Then
Me.Close()
End If



End Sub

This one is working perfectly.
}

Your flash code looks fine. But I don't remember VB now used it with flash many years back. I hope this is exactly what you require, As3.0 to VB communication.

http://nitin-sinha.blogspot.com/2009/07/visual-basic-and-as30-communication.html

Thank you so much, it certainly helped. I had a code which was giving error like HRESULT E_FAIL etc., but after reading the link I changed allowscriptaccess to always and it worked, although I am facing new problems. My code is as follows:

ACTIONSCRIPT CODE:

part1_btn.addEventListener(MouseEvent.CLICK, getFromVbNet);
function getFromVbNet(event:MouseEvent):void
{ 
fscommand("getting","");
}

function FlashFunction(o:Object)
{
	var r:String = "";
   // display the arguments we were passed 

   for (var v in o)
      r += v + o[v] + "\r";
		myText.text= r;

   trace(r); // sent from VB (cdDriveLetter)
	SoundMixer.stopAll();
	var myrequest:URLRequest=new URLRequest(r + "anim/part1a.swf");
	myloader.load(myrequest);
	stage.addChild(myloader);
   

   return "really FlashFunction was called"; // this goes back to VB
   
}

if (ExternalInterface.available)
	ExternalInterface.addCallback('FlashFunction', FlashFunction);

Visual basic code:

Private Sub AxShockwaveFlash1_FSCommand(ByVal sender As Object, ByVal e As AxShockwaveFlashObjects._IShockwaveFlashEvents_FSCommandEvent) Handles AxShockwaveFlash1.FSCommand
If e.command = "getting" Then
            Dim x As String
            Dim r As String
            x = ""
            x = x & "<invoke name=""FlashFunction"" returntype=""xml"">"
            x = x & "<arguments>"
            x = x & "<object>"
            x = x & "<property id=''><string>" + ReturnFirstCDRomName() + "</string></property>"
            x = x & "</object>"
            x = x & "</arguments>"
            x = x & "</invoke>"
            r = AxShockwaveFlash1.CallFunction(x)

The problem that I am facing is how to write the following code to fire multiple FlashFunctions to load swf on rest of the buttons. How can I write the following code to load swf corresponding to rest of buttons.

Dim x As String
            Dim r As String
            x = ""
            x = x & "<invoke name=""FlashFunction"" returntype=""xml"">"
            x = x & "<arguments>"
            x = x & "<object>"
            x = x & "<property id=''><string>" + ReturnFirstCDRomName() + "</string></property>"
            x = x & "</object>"
            x = x & "</arguments>"
            x = x & "</invoke>"
            r = AxShockwaveFlash1.CallFunction(x)

@sanjay you can either declare multiple functions in flash and call then from VB on click of different buttons. For this in actionscript declare add call back like this

  function FlashFunction1(o:Object)  
{//swf load code here for button 1}

function FlashFunction2(o:Object)  
{//swf load code here for button 2}

ExternalInterface.addCallback('FlashFunction1', FlashFunction1); 
  ExternalInterface.addCallback('FlashFunction2', FlashFunction2); 

similarly in VB on button click call the function with there respective names in xml nodes

"<invoke name=""FlashFunction1"" returntype=""xml"">"
"<invoke name=""FlashFunction2"" returntype=""xml"">"

I want to thank flash_guy, Bob_senior and troy for helping me, guiding me. I have been able to to do what I have set out for, but a small problem still remains, to make a flash swf full screen all one has to do is to write fscommand ("fullscreen" true); and the swf nicely expands but I am facing problem trying to full screen flash contained in visual basic application. I have used the following code

Private Sub Form1_Load(ByVal sender As System.Object, ByVal e As System.EventArgs) Handles MyBase.Load


        Me.FormBorderStyle = Windows.Forms.FormBorderStyle.None
        Me.WindowState = FormWindowState.Maximized

        AxShockwaveFlash1.ScaleMode = 0 'ShowAll

        
    End Sub
and the following code:

Private Sub Form_Resize()
        On Error Resume Next

        AxShockwaveFlash1.Width = Me.ScaleWidth
        AxShockwaveFlash1.Height = Me.ScaleHeight



        AxShockwaveFlash1.Left = 0
        AxShockwaveFlash1.Top = 0


           End Sub

The problem I am facing are: 1) Height increases disproportionately, I have exit button at the right top corner and play, pause rewind buttons at the bottom, both are only partially visible. What can I do to set it right? what can I do reduce its height. 2) Also, it is not perfectly at center like with fscommand ("fullscreen", "true") in flash. There is more vacant/empty space on right side than on left side of the flash movie. 3) I am getting this error: 'ScaleWidth' is not a member of 'myapplication.form1'. 'ScaleHeight' is not a member of 'myapplication.form1'. Any suggestion would be highly appreciated.

there are only 4 types of scale modes that are available in flash. You can check the detail of other modes info in this already answered question

http://askmeflash.com/qdetail/505/to-get-floating-structure-in-flex

Check the answer by Inder he has defined limitations and effects of all the modes.