I'm in no way a supporter of Flash, but how is this any different than anything else in the browser with a :hover state? With the advent of HTML5 and the Canvas element, which does work on the iPad et al, you're going to run into the same issues if you program them the same way. Now I get his concern that Flash devs would have to rewrite a lot of their already written stuff to work on the iPad if it allowed Flash, but I fail to see how this is any different from the multitude of websites that use hover drop downs for navigation and the like.
The point that we shouldn't be relying on hover states because of the push towards touch devices is a good one but it's not an exclusive problem to Flash. The reason Flash shouldn't be on the iPad, etc, is because it's a horrible bloated and proprietary plugin, and Canvas, HTML5 video, etc can do the same thing. Flash is now a dead end technology. It's only a matter of time before it's phased out altogether.