You know it can watch YouTube right? Just like the iPhone/iPod, it even has a built-in app for this. Somehow it doesn't need Flash to do that. Also, you're perfectly free to load your own videos in from your computer and watch those - or any of the increasingly common websites that are offering HTML5 video players.
But I guess that would get in the way of your uninformed ranting about being forced to buy videos from Apple.
If you'd had experience with the MacOS version of Flash, you wouldn't blame Apple for not wanting to use it. It's simply a lousy product, not only is it horribly unstable but it's a MASSIVE CPU hog, watching a 20 minute Flash video on my Mac Book Pro drives the CPU temp up a good 20 degrees C within minutes, and then the fans kick in full speed. No thanks, I'd prefer to keep some battery life on my iPod. What I like is that Apple has enough clout these days to push sites towards the HTML5 *standard* and away from Flash.
Apple has done and will continue to do a lot of questionable things that are worthy of healthy debates. But let's not pretend that giving Flash the cold shoulder is a bad thing =)