Flash works, Flash movies work, Flash is ubiquitous, Linux/OSX support it, Everybody knows it. So why do we need anything else?
Apart from the obvious point that competition is good, Flash is yet another lock-in that is waiting to happen. From the Flash Specification:
"This license does not permit the usage of the specification to create software which supports SWF file playback."
Why would you want to protect a format/specification, if not for a lock-in? Even MS-Word formats are becoming more open.
Everything you said is more applicable to Adobe than to Microsoft. Microsoft is in no position to shove SilverLight down unsuspecting throats. They don't have the trust, the respect or the distribution of Flash to be able to do that.