There are plenty of reasons not to, from Apple's perspective. First, it would risk holding up their development. Say Flash is available and working on iPhone 4.0, but iPhone 5.0 is coming, and Flash is broken. Does Apple sit on it waiting on Adobe to fix their end, or put it out and hope for the best? This ties them to Adobe's schedule and/or places a higher risk of inconsistency of the user experience. And that experience is what sets Apple apart.
Second... what if it has a significant impact on battery life (and it will, judging from everything we know about Flash and have seen)? Who will get the blame from the users in general, Apple or Adobe? Most people won't know why their battery life sucks. They just know it does and will blame Apple. As evidence, look no further than Google's recent comments that the developers are to blame if you are having battery life issues. Apple is taking ownership of the situation on their platform by being proactive, not reactive. Does it inconvenience some developers? Sure. As the consumer, do I care? Not in the least. If all this winds up doing is stops me from playing some Flash games on my iPhone, or bypassing those annoying Flash intro pages on many websites, I think I'll be fine. There are plenty of free or cheap natively-programmed games to keep me entertained anyway.
Third... security. There are plenty of documented security issues with Flash, or so I've read. One of the things Apple is heavily focused on is security, and that's a good thing. If they weren't so focused, or if it wasn't so important to so many of us, then we may as well be running Windows.
Choice is all a great thing in principle, and even in this, people have choices in terms of other platforms. But the way I see it, there are plenty of great reasons to avoid Flash, if not be rid of it entirely. To date, it's been a necessary evil on our desktops/laptops, but change will never come if someone doesn't take a stand. If Apple didn't take a stand, then I would have little choice but to have Flash, and I don't want that crummy performance you see in the video from that link. I don't want that crummy battery life. The security issues.. I don't want any of it, but I would pretty much be stuck with it because no one would bother themselves to make Flash-less sites if they already are making them and they would be usable on my device.
I don't like a lot of the various restrictions/limitations that Apple imposes, but there's plenty to dislike about the others' approaches. When it's all said and done, I can either side with the one who is truly driving innovation, or the side that is trying to copy the innovator.