A hosted flv is just a flv file hosted on your server. The affiliate would put the location of the flv file in their own player on their site.

I'd keep it the original resolution size but scale the bits down. A 1 minute clip will be about 3-5 mb. So its more about what kind of bandwidth will you allow out for them.

After you get the hosted flvs done, worry about the embedable flash videos where you would make your own player with controls, overlays like youtube etc. Flowplayer.org or the JW player.

Jimmy