If you like slinging lots of SQL and worrying about evil characters and all that, you can certainly go that way. Depends on the amount of data you're dealing with as to how cost-effective the approach will be. Personally, I like XML a lot because it is an AS3 data type, and we have lots of powerful searching and manipulation capability built in with E4X.
If you want to try it with XML, I suggest using or at least looking at the XMLDatabase utility. It's pretty handy. It's also used internally by another utility, the DesktopCitizen utility. You can see them both in action on the CodePeek demo.
DesktopCitizen allows your AIR app to remember its size, location and window state at startup. It does this by reading an XML file created or read by the XMLDatabase utility. You can also extend that facility to store your own application preferences or anything you'd like.
You can combine the XMLDatabase utility with the concept of a 'Smart VO'. See an example of a 'Smart VO' here: http://forums.puremvc.org/index.php?topic=1293.msg5973#msg5973