I'd guess that the majority of those who want Flash on the iPhone, want it mainly for video playback. Judging by how choppy it is on the HTC Hero, we've got a long wait until Apple commits to it(if ever).
I'm sure Apple would want Flash video playback to be a fluid experience, rather than a half-assed & rushed affair, just so that they can say: "Look. We've got Flash on our device!")
It's a bit like video recording. Sure the camera on the 3G can record via Cycorder, but that's below the quality that Apple would like to roll out.