When practical, you can and should edit sound and video in external editors before you import them. Flash 8 has no sound-editing capability, other than volume control. Flash 8 is, however, capable of very basic video editing. When you import a new video file, you can edit and/or compress the video file at the same time. You can create shorter clips from the video, crop the size of the frames, color-correct the footage, and sew it all together. You cannot, however, create transitions or create other special effects that really require the use of a video editor such as Final Cut Pro, Adobe Premier, or Avid Express.
This doesn't mean there aren't cheap or free solutions to edit your videos in simple to very complex ways. Windows Movie Maker 2 allows you to quickly and easily edit your video files, and it's also free (but available only for Windows XP). QuickTime Pro is a very reasonable (and useful) piece of software that enables you to perform very simple video editing and compression. For those of you on OS X, there's iMovie. These free or nearly-free editors are all you need for fade ins and fade outs, cross-fades, simple filters, and basic color modification and correction. For more advanced or professional video editing and compositing, look to After Effects, Avid Express DV, or Final Cut Pro that allow you to perform detailed and controlled color corrections and compositing.