The Flash Player in development for iPhone is not a port of existing standalone one. As they put it,the new player in development is something in between Flash Lite and Flash Player for desktop.
So this is going to be a watered down version of Flash Player. Chances are that Apple will approve a Flash player which is targeted only to render flash content on web pages as it will make the browsing experience on iPhone closer to that on desktop.
No, chances are (as John so eloquently argues) that Apple will do no such thing, as it would seriously water down the whole iPhone UI experience. Read the article!
There is a difference between running swfs on phone interface and rendering flash elements on webpages.
Allowing swfs to run directly on phone interface definitely interfere with iPhone UI experience,but rendering webpages along with flash elements in it only makes the browser experience closer to what is expected from the browser app. Its a good thing for Apple.
Unless you believe, as I do (and I think Steve Jobs does), that Flash is a business trojan horse, and is ultimately anti-open-standards and flies in the face of internet searchability, accessbility, etc.
So this is going to be a watered down version of Flash Player. Chances are that Apple will approve a Flash player which is targeted only to render flash content on web pages as it will make the browsing experience on iPhone closer to that on desktop.