Embedding external content - impossible?

[blackant]

Ok, I've been trying to figure this out for a week and I've yet to get
anywhere. I want to be able to have any site owner cut and paste a line
of Javascript into their page(s) with the end result being a block of
embedded content from my server. So this much isn't rocket science -
it's exactly what Google AdSense does. Their JS simply spits out the
markup for an iframe with the source being a page on their server.

I want to do almost exactly the same thing except that I want to be
able to have my embedded block dynamically resize as the remote content
updates (think AJAX/DOM updates on the remote page). If this all
happened on the same domain, I could simply have my iframe page call
the parent and update the iframe dimensions, but this is not permitted
cross-domain.

I also thought of injecting AJAX code as part of the JS include, but
you can't make XMLHttp requests to a different domain.

I'm sure many people have come up against this problem, but I've
convinced myself that there must be some clever solution. Any ideas?