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Apple vs Adobe - it's the third party that suffers
Apple complains that Adobe's Flash is buggy and a resource hog. Adobe rebuts by saying that Adobe don't give them access to the graphics API. Apple open up the API. Each side starts up marketing wars against the other.
At the end of the day, neither Apple nor Adobe are really going to lose out on anything here - it's the end user (the most important player of all) who will suffer.
In my work I've had to deal with Apple equipment many times in both testing and development. I also have a first generation iPod Touch. There's a common trend I've found across all Apple products I've used - Apple treat their users like they're stupid. They don't give them enough credit to make their own decisions. Everything is handed to them on a plate, which is fine for many people but doesn't cut it for me.
I think Apple has the chance to really do the right thing here - be smart, give in, let Flash on the iPhone/iPad and let users choose for themselves. If Apple are right, as soon as people see Flash running, crashing, slowing down their devices and downing their battery juice, they'll realize you're right and uninstall it, carry on merrily in their HTML5 universe and everybody lives happily ever after.
If Apple are wrong and Flash does really well, then who is going to lose out? Not Adobe. Not the end user. And really, not Apple. According to Steve Jobs (http://www.apple.com/hotnews/thoughts-on-flash/) the most important reason for not allowing Flash:
"...letting a third party layer of software come between the platform and the developer ultimately results in sub-standard apps and hinders the enhancement and progress of the platform"
Surely this is what the app store approval process is for? If an app is sub standard, don't let it through.
The key thing out of all this is that Apple have forgotten (or are trying to change or ignore) the most important rule for business - the customer is ALWAYS right. And all the recent media coverage, press releases and talk on the web is that the customer wants Flash.
Also, remember one key thing that I keep in the back of my mind all the time:
"The customer doesn't know what they want until they see what they don't want"
Let the customer decide what works and what doesn't. Don't try and make that decision for them.
I can't remember where I first heard this quote.. so apologies for not citing my source. Let me know if you know where this comes from!!!
If you weight it all up, I don't think it makes sense for Apple to open up for Flash. In fact, given the amount of flack they're willing to take for NOT allowing it, that should indicate how much they REALLY don't think it'd be a good idea - for THEM.
You pointed out Job's most important reason for not allowing Flash but focused on the "sub-standard apps" bit. I think it's more about "hinders the enhancement and progress of the platform".
What's the #1 reason people are screaming out for Flash on the iDevices right now? I'd say it's so there's a cross-platform framework for developing apps. So all them third parties can write once, publish to many. It's cheaper and more convenient.
So obviously if the doors ARE opened and Flash is invited in, everyone and their father would simply build Flash/Flex apps for the mobile platform. A few will keep specialising in each native platform, perhaps to hook into the hardware of devices more seamlessly. But basically, the majority will make the easy decision to go with Adobe now.
So then everyone, including Apple, becomes dependent on *Adobe* to push and evolve the mobile era. They'll target the lowest common h/w feature-set and developers will wait for Adobe before implementing excellent-new-feature-X.
True, but again that's for the developers and consumers to decide, not Apple. If Adobe are slow at adopting new technologies, developers will naturally move to the better methods (native apps) and the end user will follow.
And the cross-platform development theme is another great reason for all this to go ahead. Adobe are supposed to be releasing Flash Player 10 for all the main platforms out there - Android, Symbian, WinMo etc. This gives developers a great chance to release apps that can be used across a host of platforms rather than having to decide which way to target their development efforts. It's frustrating to say the least knowing that the Android version of MyApp is different to the iPhone version which is different to the WinMo version etc. Having this consistent across all platforms would be a great achievement for developers and users (although again, not Apple!)