Very good
Although I have a few nit picks here an' there, there's really not that much to critique, other than my nit picks.
So, here we go with the nit picking; your backgrounds are beautiful, no debate about it, it shows quality effort. But my one nit pick about it is this; since you created it in photoshop and imported it as such, it's pixelated, digitized and compressed looking. I know this sounds astoundingly ridiculous and would be to ask shitloads of time out of anyone, but what I would have done to avoid this would be to rotoscope all of the background art in Flash pixel for pixel so the qualities of the background art and the vectors used to animate the characters didn't clash as they do, especially when they have to interact directly with each other such as the candle dripping wax.
By this point, I probably sound like a mad man. Allow me to give more... mmm... practical advice; the quotation at the beginning went by too fast for me to read without having to right click; foward from the drop menu. You need to lengthen it so people of an average reading level can comprehend it.
Also the music, it's great but there's no transition between scenes where the music fades out to let the other tracks fade in; they just come to an abrupt end, I don't know if this was intentional to somehow set the atmosphere or what, but it is rather jarring I will tell you that.
I'm sorry I couldn't critique you based on how well you adapted this from the original story, I've never read H.P. Lovecraft before. Matter of fact, I'm only familiar with his character, the Elder God Cthulu and some shit people posing as H.P. Lovecraft have written.