The flex2.compiler.mxml.InterfaceCompiler class defines a function named createInlineComponentUnit() that extracts the MXML code for an inline component and copies it to a virtual file. The inline component will now be treated like a separate MXML file by the compiler.
The flex2.compiler.mxml.builder.InlineComponentBuilder class takes the ActionScript class generated for the inline component and passes it to the factoryFromClass() function defined in flex2.compiler.mxml.builder.AbstractBuilder. The factoryFromClass function takes a reference to a fully-qualified ActionScript class name and uses it to create an mx.core.ClassFactory. The generated class for the inline component is passed here from
The flex2.compiler.mxml.rep.init.ValueInitializer class defines a function named getDefinitionBody() where objects defined in MXML are instantiated. This includes the mx.core.ClassFactory for the inline component.