It can be a bit cumbersome to get started, and understanding the theory of server and client communication is not immediately obvious, as I have come to learn, but some articles greatly help. In a nutshell, I write all the server code in C# that receives and broadcasts packets of information, while the clients receive and send updates back to the server within the Flash application.
The server code can be compiled into a DLL, so it can be uploaded online to test on multiple computers. Otherwise, the server can be run locally for testing on the same machine.
In this prototype I borrowed art assets from Zombie Situation, and hooked up basic WASD movement with mouse controlled shooting. This screenshot was taken with me connected to the game on three computers simultaneously. It basically has the framework I want, where players send and receive updates at 10hz while interpolating frames in between. Best of all, it works!!