When I first saw the Flash 8 feature Object Drawing, I thought it was just automatically grouping the object (like with the Group command), so I dismissed it. I dismissed it for a whold version! Last night in Flash CS3 (Flash 9), I turned Object Drawing on for my little boy, and then noticed when he moved the cursor near the edge of the object that the curve on the cursor appeared!
After a quick test I realized that groups were indicated with a bounding box that was closer to a cyan color where the object bounding box was a darker blue. It is very cool that the objects are still modifiable in the standard Flash manner of pulling out curves, corners, or corner points, yet they do not merge with the shape below, it's like having the best of both worlds... being able to use Flash's very natural feeling vector drawing tools, but have the result be modifiable in a way that is more similar to traditional vector tools like Illustrator. I don't see this technique replacing the old Flash way of drawing, but supplementing it so I don't have to rely on moving back and forth between layers so much.
It is easy enough to break apart objects with Ctrl-B, just as you would Symbols or Groups. But how can you make them from a non-object? After cruising through the menus, I was clueless. So I resorted to using the online Help (the equivalent of driving and stopping to ask for directions, IMO). The stop was useful, to make an object select Modify > Combine Objects > Union. Whoo hoo! The only thing that was missing was a shortcut to make a union. Since I don't really using the Group command, it was a quick decision to switch the use of Ctrl-G to make objects instead of groups.