I don't know. I'm not Michael Zalewski, and I can only speculate about the basis behind this advice. Did he say anything more in the book?
crossdomain.xml file contains policy that Flash uses to determine how other sites may interact with this site. If it contains a permissive policy, then bad things can happen. Therefore, you don't want users to be able to upload a policy that sets a permissive policy for your site.
There are three risks that I'm aware of:
These days, by default, Flash will look for the
crossdomain.xml file at the root of your site:
http://www.example.com/crossdomain.xml. If a user has the ability to upload files into the root of your site and choose its filename, the user could choose the filename
crossdomain.xml and choose its contents to specify a permissive security policy. That'd be bad.
I believe that once upon a time, Flash applets could specify where to look for the
crossdomain.xml policy file; in particular, Flash would gladly look somewhere other than the root of your site. Suppose you allow users to upload files of their choosing, with their own choice of filename, into the
/uploads directory. A malicious user could upload to
http://www.example.com/uploads/crossdomain.xml. Then, the malicious user could host an evil Flash applet on their own site and have it tell the Flash platform that
www.example.com's policy file can be found at
http://www.example.com/uploads/crossdomain.xml. Flash would happily comply, leading to unhappy consequences.
I believe that modern versions of Flash player no longer suffer from this vulnerability. They will always look first at the root directory, to check for a
crossdomain.xml, and will only look for
crossdomain.xml files elsewhere if the one at the root allows it.
Once upon a time, older versions of Flash player had security flaws that would allow an attacker to fool Flash player into looking somewhere other than the root directory for the
crossdomain.xml file. Then we're in the same situation as the previous risk. I believe this vulnerability has been fixed long ago.
I don't know whether the latter two risks are relevant any more. I think they've been fixed long ago. However, I suppose it is possible some of your users might be using old versions of Flash player that still have this problem.
Given what you said about hosting all user content on a separate domain, as far as I know, your site should be safe, even if you don't take any further actions. However, maybe Michael Zalewski knows something I don't know. (OK, I'm sure he knows a lot that I don't know; I mean, maybe he knows some fourth risk/attack that I'm not aware of.)