I have some formatted text with an underlined email address that is meant to be
clickable on the web site that is positioned beside a graphic that fades in.
When I "test movie", the text format looks good until the end when the graphic
fades in. When the graphic comes in the texts shrinks leaving part of the
underline with nothing above it.

Please help. This is driving me insane.

I am using CS3 Flash.

It's probably the way you are displaying the text. If you use certain text
options such as device fonts, anti-alias for readability/ animation, etc. the
text changes a bit when you publish the movie. Sucks, but my advice is to
publish it, adjust it, publish it, adjust it...