Dan, Flash is dead. HTML5 is already making huge leaps....iPad will finally put Flash out of it's misery. All it does is slow down/crash browsers in the first place. Remember, Apple shipped iMacs without 3.5 floppies and the world laughed at how dumb Jobs must be to not include FLOPPY!
It doesn't need full OSX. You don't need to see file structures, terminals, et al on a small portable device. Maybe for your Mac Pro that you're doing heavy duty things on, but certainly not on an iPad. Why see the parts when they just work? Much like the iLife suite allows you to share multimedia files seamlessly across different apps (without having to dig through folders), this OS will do the same. Click on an app, everything you need with it will be automatically built into the app.
As for battery, 10 hours is the VIDEO battery life. I'm sure simply using it as a reader, the battery will last much longer. 3rd party vendors will undoubtedly develop cases/battery packs that fit perfectly on it, just like the Juice Pack for iPhone.
John - Price? $500 is too much? A Kindle DX is $490 and it's a black and white paper weight in comparison. It doesn't do 1/100 of what an iPad does.