...Ah, so you've had access to CS5 and have worked with the Flash packager extensively I see. Because, you stating that Flash is bad, as a fact, could only come from personal experience with the unreleased tool that is getting discussed as if it was the only tool impacted by this.
In my opinion Flash apps are bad, on balance, for the iPhone platform. Well, bad for Apple certainly and bad for users.
Apple doesn't want to loose control of its platform and has some interest in the general quality of apps.
Users, or course, have a strong interest in the quality of apps.
Flash apps will produce bad apps because:
Primarily affecting non-game apps: Flash imposes its own UI rendering and event system, breaking native look and feel. E.g., for a lot of the UI for most of the apps, buttons won't be the standard size, standard fonts won't be used, flick scrolling will be replaced with scroll bars or maybe won't use the correct drag coefficient, spell-check and word replacement will not work or will work differently than normal, fonts will be rendered with low quality anti-aliasing, etc.
Affecting Game Apps: Flash won't use hardware acceleration.
I haven't used the CS5 beta iPhone publisher, but I don't need to to see the downside of using Flash for iPhone apps. But these are the problems I see today with Flash-based web apps. Adobe can't address the UI issue, at least not without breaking compatibility with all existing host environments (in which case there's no point to using Flash).
Perhaps Adobe,
could extensively optimize their rasterizer to be hardware accelerated on iPhone OS devices. But based on their previous record, I highly doubt it.
Has Adobe somehow addressed these issues
This is a big drawback for non-game apps. 2) Flash doesn't use