The sub-par quality is down to the sub-par source and over-compression of output.
Flash video *can* be great. But the stuff you see on YouTube etc is normally amateur movies in the first place.
When Flash Video is used for multimedia purposes, not home movies, it has features and functionality like few other tools out there - dynamic drop shadows are just the start (yeah I know you don't care
Where I am most interested in Flash Video on devices, though, is professionally. I've been building multimedia-based educational content for close to 10 years. Video is one of many tools in my arsenal that can be used to create effective training. Up to now it has been difficult to create training that includes video which can be delivered to multiple target devices - PC, Mac, PocketPC, Symbian phone. This announcement makes it possible to do that, without worrying about converting movies to .mov, mpg, DivX, wmv, 3pg etc etc so that it can play on the various devices.
Of course, most of the world just wants to see YouTube when they are on the bus or in Starbucks