I am not making an MMO I am day dreaming about making an MMO.
loadVars essentially calls a webpage with the arguments you want to pass in as part of the web address then reads the contents of the page back into flash. I have had some success making close to real-time multiplayer (ie dynamically updating scoreboard). However I am not sure if this is the path to follow for taking the next step into multiplayer.
Performance issues aside, the bigger issue I'm seeing is that you'd have to write your server-side game logic as a PHP script or something, and there would be no current state beyond what was stored in the database. I don't know a whole lot about MMO server design, but I assume there's an active world state to handle transient things like combat actions, and that the database is there to maintain permanent changes to the world like player statistics.