Just read the steve jobs letter. Essentially it does seem as though they are trying to protect the apps market, but more so to maintain quality and functionality by preventing cross platform apps on the Iphone.
If you started putting cross platform apps on iphone the user experience and functionality just wouldn't be the same, and yes it does chew up a lot of processing power so it makes sense for them not to support it.
That said even if flash is "on it's way out" I still think it's pretty arrogant to simply not support it at all and deny customers access to a massive chunk of the internet, particularly on the ipad. Like it or not flash is still pretty entrenched and will be around for a while yet. Even if HTML5 will supercede flash it's still important to support legacy formats.
Also this talk about apple supporting open source formats for the internet is bullshit. H.264 is a proprietary format which was chosen over the open source OGG Theora.
Adobe has announced the first step in its ambitious effort to move beyond the web and into app-based digital content delivery, and the poster child for its first foray runs on a magical and revolutionary device from Adobe's derisive frenemy, Apple.
I'm working on something with a developer at the moment. At this stage we're just working on multitouch/swipes to slide/pinch and zoom sort of stuff that'll run within the browser making it cross platform. If anyone knows what they're doing in this area feel free to shoot me an email.