The player does read in width/height vars. Whatever size you set them to is the size your post-image needs to be. The player is not equipped with the functionality to resize the post-image.
The default width/height for the player is 550x400. I resized the player to 352x196, and made my .flv the same size. I also made the post image 352x196, and when the player would load the post image, the post image would be smaller than the frame. It took me awhile to figure out what was wrong, and then I realized that the player didn't know that it had been resized smaller, and when it imported the post image, it believed it was smaller than the frame. In other words, the player believed it was still 550x400, and it imported the post image at actual size--then the player would be resized down, causing everything to shrink.
I assume the way to fix this would be for the player to read in the width/height flash vars so that it knows it is smaller/larger, then for it to read in the post image width/height, and act accordingly.