The App Store launched on July 10, 2008 one year and a half after the announcement of the iPhone. Previously there had been no 3rd party apps on the iPhone, only Apple-made native apps and 3rd party web apps. In that context, Flash's absence needed to be explained. Nevertheless, it took another 2 years for Jobs to write his screed, "Thoughts on Flash". By that time, Apple was well aware what a cash cow the App Store was

If the app store appeared 1.5 years after the first iPhones, it was already conceived and development well underway when the iPhone launched. I don't have any firsthand knowledge of who blew off whom, but I'd guess it was Apple doing the blowing because that's traditionally what they do.

I'm not sure that Apple intended to exclude Flash from day 1. I imagine there were difficult technical integration issues, never mind any other business interests. But once the App Store was launched and Apple commanded a 30% share of every single application sold on the platform, I cannot imagine why they would allow Flash to give away comparable applications for free.

The argument has merit that Apple wanted a more precise control over user experience, and badly written Flash apps could disrupt that, but I honestly believe that was a secondary concern compared to protecting their App Store revenue stream.