Ran in to two interesting cases, where the flashlog.txt wasn't working and thus trace utility SOS Max stopped working. For a bit I thought it was something about setting up Flash 10 debug version. It wasn't at least entirely.
The first case was my normal development machine, the second was a new non-development test machine (interestingly slow pc's can help show errors in ways my fast dev machines cannot). For the dev machine, this was particularly annoying as it's how I debug many applications.
In both cases, I first followed the instructions here which are just the basic settings. and made sure that the debug version was installed by going to the version check
Case 1: The Primary XP Development Machine
In the first, mm.cfg was set to write to a place that SOS wasn't looking at C:\flashlog.txt, which may have been the Flash 10 install, somewhere in Flash 9 they took out the ability to specify the location of the flashlog.txt. So I reset it to what SOS was expecting e.g.
C:\Documents and Settings\
But that still didn't work. So I tried deleting flashlog.txt and *couldn't do it*, as it was in use by AIR, adl.exe ... in fact two instances of them, likely spawned by Flash CS3 publishing for AIR. Unlocking them, allowed the Flash CS3 and various other flash debug players to write to the log file again.
Looking into this appears to be a common headache see
More worrying is per Adobe that there is a bug open on it, but per discussion "There is no workaround for this" and no fixes are planned
ALSO in the same folder policyfiles.txt was a whopping 200MB! This is due to apppend in the mm.cfg being set to true, so beware that you clean up periodically if you do have it on (e.g. if your fishing for intermittent bugs)
CASE 2: The Windows Home Netbook
This was more subtle, a fresh pc, downloaded the debug player.
Being a 'power' user of PC's I always have 'show hidden files and folders' and 'show file extensions' turned on, but on a new install these are off by default, the hidden folders was easy to spot, many of the folders (e.g. Application Data) weren't visible. I created a new text document mm.cfg, saved it. But the Log directory and flashlog.txt never were created. I tried a bunch of things, while concerned with IE, tried with FireFox, restarted the OS. After much restarting trying different things, constantly reinstalling the flash player, trying IE7.
What helped me solve it was going into a command prompt and opening up C:\Documents and Settings\
It would have been faster to have copied the mm.cfg from the original dev machine, but when something so simple as a text file doesn't work, I've frequently found that it comes back to haunt me. Given this machine will be used at CES I'm glad I spent the time.
I've also discovered that mm.cfg apparently is checked every time the flash player starts up, so that no restarting of the browser or PC is needed in the case of IE which can install ActiveX without restarting itself.