I am trying to create a query string of variable assignments separated by the & symbol (ex: \"var1=x&var2=y&...\"). I plan to pass this
Are you expressing the URI in HTML or XHTML? e.g. If so, "&" is the correct way to express an ampersand in an attribute value, even if it looks different from than literal URI you want. Browsers will decode "&" and any other character entity reference before either loading them or passing them to Flash. To embed a literal, lone "&" directly in HTML or XHTML is incorrect.
I also personally recommend learning more about XML in order to think about these kinds of things in a clearer way. For instance, try using the W3C DOM more (for more than just trivial Javascript); even if you don't use it day-to-day, learning the DOM helped me think about the tree structure of XML correctly and how to think about correctly encoding attributes and elements.