I find that your argument against Flash on the iPhone misses the point. I don't want to create iPhone-specific apps with Flash (yet!). A similar argument could be provided for any web technology:
"HTML doesn't support multi-touch, iPhone runs on it...hence, iPhone should not support HTML"...?
All multi-touch does in Safari is zoom! Flash could support the very same functionality. I think you're focusing on the limitations of the technology instead of focusing on the limitations inherent to the iPhone today.
My reasoning goes something like this: the Internet contains information that I want to access. Often, that information is embedded in Flash widgets, Flex RIAs, iPapers, etc. As an end-user, I could care less that the information, the video, the whatever is in Flash, HTML, or sign language - I just want to be able to see it. Continuing with my previous example: I don't care that I can't use two fingers to control stormpulse, my only requirement is that I can access the existing information! I want to be able to see the content in the links my friends send me, to see the videos embedded in the pages I'm looking at. That alone should be a large enough requirement to make Flash on the iPhone useful. You can argue for days about the best technology to build something in, but the fact is that when I can't see a video I want to see on the iPhone, I'm frustrated.
"I don't want to create iPhone-specific apps with Flash (yet!)."
You shouldn't. But a lot of Flash apps made for WIMP won't run smoothly or, in many ceases, at all on the iPhone.
"All multi-touch does in Safari is zoom!"
Nothing is perfect, but the iPhone, unlike any other mobile on the planet, does in fact have a coherent user experience. And the basis of that is multi-touch, not just in Safari but everywhere on the phone. This isn't some Linux distro where all apps have their own UX paradigm. You can't expect iPhone users to switch UI paradigms when they encounter Flash apps just because Flash can't handle multi-touch or because its WIMP conventions conflict with the iPhone's. (The vast majority of Flash apps/sites are predicated upon mouse rollover, for example, that doesn't work on the iPhone.)
This is a movie we've seen before. You could give the same example with friends sending you links for stuff buried in Active X containers in IE that no other non-Windows browser could properly render. What happened? MS has gradually abandoned Active X, and much of what Active X could do can now be done via non-proprietary browser technologies. The scenario won't be so different for Flash. Nothing will be black and white, but that's the trend.
"HTML doesn't support multi-touch, iPhone runs on it...hence, iPhone should not support HTML"...?
All multi-touch does in Safari is zoom! Flash could support the very same functionality. I think you're focusing on the limitations of the technology instead of focusing on the limitations inherent to the iPhone today.
My reasoning goes something like this: the Internet contains information that I want to access. Often, that information is embedded in Flash widgets, Flex RIAs, iPapers, etc. As an end-user, I could care less that the information, the video, the whatever is in Flash, HTML, or sign language - I just want to be able to see it. Continuing with my previous example: I don't care that I can't use two fingers to control stormpulse, my only requirement is that I can access the existing information! I want to be able to see the content in the links my friends send me, to see the videos embedded in the pages I'm looking at. That alone should be a large enough requirement to make Flash on the iPhone useful. You can argue for days about the best technology to build something in, but the fact is that when I can't see a video I want to see on the iPhone, I'm frustrated.