Flash Is Dead
I assumed the performance issues they were having back then were simply technical hurdles that would be overcome by Adobe's engineers before long. In the end, the lack of a monoculture was certainly a significant factor in the demise of mobile Flash, but the real nail in the coffin was that Adobe never even got mobile Flash working demonstrably well on a single model on a single platform, let alone working well on the "billions of mobile phones" they were shooting for with the Flash Consortium. I completely overestimated Adobe's ability to deliver, technically.
It would be interesting to know why they weren’t able to deliver.
Update (2011-11-10): Dr. Drang:
Think about that: a video I’d watched comfortably in 2005 was stuttery and unwatchable in 2008 on the same hardware.
This, to me, is the mystery. I remember when Flash performance seemed OK on Mac hardware that is probably slower than current iOS hardware. Presumably the current Flash code is bloated, but if it was possible before it seems like it should be possible now. Unless our memories are failing us.