You can't compare different CPU architectures by the number of hz. Desktop (=laptop in this case) processors are out-of-order power-sucking beasts compared to the power sipping CPU in your phone and other devices.
Watts vs. milliwatts in comparison.
t1=time.time(); x=[i*i for i in xrange(1000000)]; time.time()-t1
On my 2.4GHz Core 2 Duo iMac, this runs in 0.47 seconds. On my Nexus One (using the Python executable from Scripting Layer for Android), it takes around 3.8 seconds. So the N1 is around an eighth of the speed of the iMac (ignoring the C2D's second core), which is actually pretty impressive.I see nothing wrong with assuming that your phone should be able to handle laptop-like web media functions, such as watching video and playing audio or games.
Just punditry on my side, but I've also tried the jailroken frash on my iPad - and while it worked fine, I clearly saw that certain games are not playable - they were made for mouse with buttons, and just does not work with fingers.
Obviously this could be changed, but what Steve is afraid, is that people might perceive this as iPhone/iPad/iPod failure, rather than flash application one just expecting a mouse, and someone trying to emulate it with "fingers".
My iPhone 3G's processor is faster than one of my laptops (that I used on a daily basis, but recently retired it due to buying a new Starling Netbook). You're damn right it better perform just as well!