decent, free development tools

Well, you can have these for any mature platform. Be it QT, Flex or even Java. I'm not sure what's more decent about the HTML toolchain. The often cited FireBug is, to me, merely an emergency bandaid that makes development at least possible but still far from enjoyable.

the ability to interpose proxies and application middleware between the client and server transparently

There's nothing stopping any fat-client to speak HTTP. You don't need to a browser for that.

and a very, very large install base for the client runtime.

I'd say installation base is a red herring when talking about cross-platform apps but I'll give you that "instant-on" is an argument. For that I'd point to Air, which can run hybrid in and outside the browser.

I'm not arguing that HTML doesn't have it's place, mind you. But the extent to which it is abused nowadays is absurd.