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.