I would still rather have a large download than no download. Adding flash wouldn't hurt anything, it would simply enable some more developers into the iPhone space.
Remember that "software decoding + crash problems" bit? It certainly would cause harm.
And Apple's not concerned about bringing more developers to the iPhone, they're concerned about bringing _great_ developers to the platform. It's never really been about numbers with Apple, anyway.
EDIT: I'm also not saying that Flash developers are bad, and that they shouldn't make things for the iPhone. I'm just saying that Apple's not playing a numbers game, they're playing a quality game. I'm sure Apple would love for all Flash devs to start making apps with Objective C.
