As far as sizing goes we suggest the following total outgoing bitrates for each instance size:
small: 150Mbps
large: 250Mbps
xlarge: 350Mbps
You can certainly do a bitrate test on stream startup and use the appropriate stream based on avaliable bitrate. The BW Check tool is here:
http://community.wowza.com/t/-/31
We will support Flash dynamic streaming when Wowza 2.0 is shipping.
Charlie