I have been using flash on my windows mobile pocket pc for some time and it works fine, for drop down menus, simply press and wiggle slightly and the menu comes down then click on what you want
flash works fine for mobile devices, the main problem is the battery life, it is the killer of batteries. When using a flash intensive site, it will hold the devices CPU usage between 90-100% if you are streaming flash content, you will have the CPU pulling pretty much it's full power draw. then depending on the signal strength, the wifi will by using it's full low power mode or if the wifi radio supports it, it will kick into it's high power mode (happens if while connected to an ap, the signal is weak and the available bandwidth is being saturated, it will boost the power in order to try and connect at a faster rate, this often increases the power usage of the wifi radio making it about 6-7 times higher than the low power mode (at least in the pocket pc's)
if apple mobile devices were to support flash, it will cause you to have horrid battery life, and since they like using internal non user accessible batteries, you don't have the option of taking out the stock battery and getting a extended battery that adds like nearly an extra inch to the devices thickness.
The problem I have with apple and this is that they should at least give the option for users to do it. Simply put a warning about enabling flash then let users use it.
just because something can have negative outcomes does not mean you should completely disallow it.
Look at PC's, if you wanted to, you can crank the voltages really high and kill your CPU, these companies simply put a warning and give you freedom on what you want to do.
When driving or riding a bike, you risk crashing and getting injured or killed, does this mean that the government should ban all use of of these vehicles or simply let people know the risks and with that knowledge, let them drive?
from my experience, flash will generally cut your battery life in half (or more) but I would rather have flash than not have it. I am loosing battery life but the experience is worth it.
also, 90%+ of the web uses flash, just because HTML 5 is out, does not mean that they will switch. remember that it is a different language, most people will not want to learn it. also most people who have websites don't know much about it, they generally hire people to do it, so what are the odds of these people spending tons of money in hiring a graphic designer and a web dev team to move their website from flash to html5 just to satisfy a few iphone users?
also with both flash and html5, mouse over menus are still used because it is convenient for everyone with a mouse and keyboard, this will not go away any tome soon, even with html5
Also gaming in html 5 is harder than with flash, it requires a lot more work and a lot more dependencies in order to function, Apple is counting on this as due to these dependencies, it will be nearly impossible to get a very functional app on the iphone or ipad, this way it will not conflict with apples app store.
HTML5 is new tech but it is not a replacement for flash, doing HTML5 vs flash is like arguing mac vs pc, there is no winning it.
Also for gaming, html5 has a larger performance hit than flash, but it handles video streaming better in terms of CPU usage, but then again, it lacks some of the flash features such as deblocking, most html5 streaming videos look more pixelated and are not as sharp as flash video streams. While this may change in the future, currently HTML5 lacks postprocessing. many websites who lack the limit less bandwidth of companies like google will not be able to handle the bandwidth load of HTML5 because they will be forced to use higher quality content instead of relying on post processing.
Adobe is currently facing this problem right now. They added hardware acceleration of h.264 but then they lost the ability to support a lot of the post processing that goes on in flash videos, (which is why if you use the beta flash player and enable the hardware acceleration, it uses less CPU usage but then the video quality also goes down. Fixing this will prove to be a challenge)