What is completely ridiculous is that there is absolutely no change of intent of the updated SDK wording.
The whole internet is abuzz because the intent _has_ obviously changed. This is clear to any developer.
Translation layers/Virtual machines/third party frameworks were always forbidden and pretty much every developer knows this.
Translation layers were never targeted before. That's why there have been more and more of them. Any knowledgable developer knows this.
Apple is well within it's rights to demand native apps for it's platform, and such a decision will lead to better apps from dedicated developers, rather than yet another cross target output check-box from Flash "developers".
It affects more than just "Flash developers".
Apple appears to be against the idea of any cross-platform tools that make it easier for developers to produce apps for both the iPhone and other devices. This will lead to developers targeting more friendly platforms.
It's hypocritical that some Apple fanatics talk about supposedly cross-platform HTML5 web apps... but then suddenly (just in time with the changed SDK rules) have a hissy fit against cross-platform native app development tools.