You cannot simply display 1080p at 590x250
You have to first scale the image to the desired dimensions (thus destroying much resolution), and then re-encode the stream with a good flash compatible codec like x264.
BTW, why did you pick a strange display size with a 2.36 aspect ratio? Anything shot on your camera will be 16x9 (1.78), thus requiring pillar boxes (side matte) to display correctly in your player, which means your effective resolution can only be 445x250, which is simply dreadful
Now, you can definitely make things look good if you do your transcode smartly. Do use x264, for sure. It's the best H.264 encoder available (and is free btw
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Ghitulesco brings up a good point about deinterlacing as well. Your camera probably has a natively interlaced sensor, in which case you will want to shoot interlaced mode, and deinterlace prior to scaling and transcoding. You can do this all in one step, no worries.
~MiSfit