it uses min-width and max-width to limit the size. The drawback is that it doesn't work on IE 6-7.. If I remember correctly IE7 have issues while setting min-height on Object Elements and IE doesn't support min-height. at the time I coded swffit other browsers also had issues, see swffit source code for comments about bug fixes.
please note that swffit isn't being maintained anymore: http://www.google.com/url?sa=D&q=http://groups.google.com/group/swffit/browse_thread/thread/5e019d8a1dd47dce&usg=AFQjCNHV0E4heOcXXIr0knE1DNNcazc9Dw
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