Well if their alternative works better then I am down with it because the current flash is garbage. They have had over 2 years to create a decent mobile version of flash and they sat on their ass.
I think Apple is always about the user experience., that isn't to say that this does not pan out better for them that Adobe sat on their asses. Apparently Apple was not.
I don't think this changes the fact that flash is trash! LOL
If they are so focused on user experience, then why did they approve the Monopoly game from EA Sports? It takes a fully charged ipod touch down to 20% warning in less than an hour. Even flash isn't that hard on battery life. And that's not the only game I have that absolutely kills my battery life. I like the monopoly game but I can never play it unless I'm hooked to the computer or only need 45 minutes of runtime (e.g. it's totally useless on a plane or at the airport which is why I bought it).
I have no problems with them doing a flash alternative, I just don't like their lies as to why they don't want to support flash. Just be honest and say that you are working on a solution that you feel is better. Like you've said with itunes, most people that use flash are happy with it (actually, I'd bet that the vast majority of people don't even know they are using it!) so I would hardly consider it "trash" just because some people have issues.