Hmm, does not work for me either. Maybe there are some special dependencies to make the make the menu parameter work, or this is broken.... as far i can tell, xowiki does the right thing by adding so.addParam('menu', 'true');
just asked our local flash guru: the menu attribute is just for activating/deactivating the context menu (right click on swf content). Try it, and you will see, it works actually with SWFobject and therefore with xowiki.