This is true, but unfortunately only really with the iPhone. Flash Lite works on all of the other handsets that matter right now. And its really Apple keeping the gate closed on Adobe, not the other way around.

I agree though, widespread mobile adoption of Flash (and any other browser plugin) will be seriously slowed while Apple does not let them in the iPhone. The thought of having to make completely different javascript and flash versions of a web app is not very attractive when you could just focus on a javascript version that works on both.