I'm sort of wary learning to code iPhone programs as well -- it seems cool, and there's lots of interesting ideas there -- but do I really want my hard-earned development skills to be dependent on the whims of Steve Jobs?
I've done it, and it does work. Is it a pain? Of course it is. Do you get the Adobe built data components you get with the advanced and charting editions? Nope. Can you build them yourself? Of course, and there's a bunch of open source controls & components you can download too.
You really have to be careful whilst criticizing a company who essentially gave away their protocol and build tools. They could just as easily have marked that IDE and tookit up to $1,000 and we'd still buy it.
One of my co-founders like flex and have programmed some admins in flex, in xml. Myself I don't care much for flash. I've dome some actionscript programming and presentation development but I only do it if I really have to. I much prefer to work with HTML/Javascript. My co-founder would like us to work with flex instead of rails which he dislikes. I have no love for programming in XML, so the middle ground is that we have coded up some small web frameworks in java with seaside-style html generation. It works fairly well.
You can definitely use Rails with Flex. Flex is not a server side language or framework. It can interface with all of them really well through web services. Heck, I'm pretty sure Flex can even inject and call JavaScript functions on your pages. Rails can render things to XML amazingly well, and you can still build an HTML response as well while maintaining the functionality of the Flex application.
Your co-founder is comparing apples to oranges, but whatever works for you all is great. Just don't let the tools limit you.
Flash reconciles various needs, from indy creatives to high-budget publishers to ordinary consumers to videographers to anyone seeking a means to communicate their beyond-text ideas to an audience.
Reconciliation of all these interests is a difficult task. If Adobe were to mess over any of these constituencies, Adobe would pay the price.
Who paid the price for HTML4's confusion over OBJECT and EMBED tags? The responsibility was not as direct.
Also, everything else people have said. It uses a plugin, which slows things down and appears non-native. It's proprietary; if one day Adobe says "Flash Player is universal, let's start charging for it, and jack the IDE cost up 50%. We don't care if everyone moves off of it because we'll make a lot more money off of the relatively short-lived mass influx of license money", or "Let's just not release the new version or ensure compatibility on (Windows 7/OS X 10.6/Linux/Solaris/any other platform important to your userbase) [yet]", or "Let's break compatibility in Flash Player 11 and make a really difficult downgrade path", you and your users are kind of screwed, and so on.