ok, after reading some more I found that LoadVars is a bit better for what I am trying to do (I hope). It still isn't working, but under "debug" -> "list variables" I can see var1:"movie.swf" which means its at least loading the text file and seeing the string I need.
I can't seem to figure out why it won't play the movie though.
Here is my updated code if anyone can help.
movieData = new LoadVars();
movieData.onLoad = getMovieData;
movieData.load("variables.txt");
function getMovieData()
{
loadMovie(movieData.var1, 0);
}