A few thoughts:
1) Flash itself is not the problem... but the implementation sure can be. Adobe's supposedly working with the ARM cpu makers to add hardware support.
2) Funny memory: do you recall when Jobs showed off the National Geographic website, and it had a static image of a big cat in one section? And then it was discovered that the real NG website had a Flash menu there? So the iPhone should've shown a "download Flash" icon, but Apple had made a copy of the website and stuck in an image in place of the Flash?
3) For that matter, I'm pretty sure that the Apple website used Flash, or at least a bunch of QuickTime sections, until the iPhone came along.
I still recall the Jan '07 debut, when Jobs coyly avoided the Apple website in the iPhone's browser. (He was about to click it, but then offhandedly commented, "Oh you know what it looks like" and went someplace else. That was one of the very best car salesman pieces of handwaving and audience misdirection he's ever done.)
The reason he didn't go to the Apple website for another couple of months, was because he knew it would look awful on the iPhone, without QT or Flash and because of the huge usage of frames it had at the time, which would've made navigation a real pain.
They completely rewrote the Apple website in those months before the actual sales launch put the iPhone in consumers' hands.
Yes, and thankfully so that quicktime and flash are gone from apple's website.
Plug in architecture for the web it completely a 1990's approach to browser design. I don't know why HTML has stagnated for so long, but I honestly cannot believe it is 2009 and we still don't have a <video> tag, and that we are only now discussing it.
Even the way javascript is handled, is a poor design, IMHO (i.e. a separate engine for it). HTML or javascript had any foresight they would have come up with a much better solution.