If native optimized HTML5 video plays smoothly and Flash doesn't, nobody cares that it's not fair to compare the two. The "fracking mobile phone" point is irrelevant. Either Flash plays smoothly or it dies.
It's really this simple: Flash's bid for relevance on mobile phones is only going to work if they can make desktop Flash video work reliably.
They don't even need to make the games and stuff work properly. Stipulate that they fix that. They still fail if everyone shakes off the Flash video lockin.