I'll have an example of a configurable widget up on the wiki sometime in the next day or so.

Basically, you supply a second movie, which will run on the website, which is passed information about the current settings of the widget.  You build a UI to configure the widget, and when the user accepts the settings, you store them back to the server.

You are welcome to store the settings wherever you wish, however, you'll probably still need to store *something* on our server in order for the widget to know what settings to send to what widget.  You'll obviously also need to provide the necessary access rights (using crossdomain.xml) to allow the widget to access the data.

An example of a configurable widget is "Horoscopes" - when you add the widget to the widget mix, you'll see it has a "configure" link - if you click that, you'll get a dialog that lets you select your sign.  Some other configurable widgets are Flickr, Google News, and MySpace.

A widget should be able to do something rational even if the user does not configure it - for instance, an unconfigured Horoscope widget will show a random sign, an unconfigured Flickr widget shows the "Everybody" feed, etc.