That makes no sense because they are pushing HTML5 which allows the same thing
Initially, Apple only wanted web apps for the iPhone. It took nearly a year for the iPhone SDK and App Store to be opened up. Apple cared mainly about opening up the platform to outside developers. A web app running HTML5 and JavaScript could do very little damage to the iPhone OS whereas a native App has the potential to do more damage.
I still don't think their hatred of Flash is about protecting their revenue stream (which shows why they allow NetFlix streaming). They sell songs on iTunes, but Pandora hasn't hurt that, so I don't think they see NetFlix as a threat either. They probably look at the trade off that having NetFlix would sell more iPads to people who might then buy more stuff from iTunes (music, apps, or videos).
I think their hatred of Flash is really a hatred of... Flash. I don't work at Apple, but I can just about guarantee you they've ported some version of Flash player over to an iPhone in-house and it probably sucks. The same probably applies to the Java Virtual Machine as well. When you have such a crappy intermediary on a phone where user experience is king, Apple doesn't want any part of it.
If you look at some of the other intermediaries that are out there, primarily Unity3D, Apple happily lets them in because they don't affect performance. Yes, you can build crappy apps in Xcode and Unity, but it's also just as easy to write good apps. I imagine in Flash and Java, it's probably hard to write apps that do anything useful, but still live up to Apple's expectations for providing a slick user experience.
Adobe is whining about CS5 apps being blocked, but my prediction is that a CS5 app is going to be sluggish, particularly the touch interface, compared to an Xcode or Unity app. We'll just have to see how it all plays out.