I recently had some trouble getting JW Player to work in IE7/IE8 with Flash 10.3.183 using Shadowbox to pull it up in a pop up box. I did a ton of digging and when the dust settled I found this page on the JW Player help forums to be of the most help. One of the other posters suggested passing the parameters directly to the the player.swf file in this manner:
player.swf?file=videos/path_to_video_file.mp4
You can also pass in the preview image and any other variable in this manner.