A major gotcha when testing locally with FMS4 Dev Edition and multicast (fusion or p2p) is detailed here in the FMS docs.
Note the section that says:
To run Flash Player from the local file system, do the following to add the folder containing the multicastplayer.swf file to a list of trusted locations:
Right-click on the screen and choose Global Settings.
On the Flash Player Help page, from the list in the top left, choose Global Security Settings panel.
Click Edit locations > Add location > Browse for folder. Select the Flash Media Server rootinstall folder. (On Windows, the location is C:\Program Files\Adobe\Flash Media Server 4 by default.)
Initially I could not find the docs for the multicast service and I was about to lose my kind as to why my stream was not being received – I hadn’t been running the Debug Flash Player which would have likely thrown an RTE and made me realise what was going on. So make sure that you follow the steps above… What a pain.
Don’t even get me started on the usability of that dreadful settings manager. Apparently it is being fixed though (according to Adobe Product Managers), can’t come soon enough…