Ethan Kaplan seems to think so:
If I was Microsoft I'd be s***ting myself about now.
While Adobe says Flash Lite 3 is going to be delayed, it did say it will be adding H.264 video support to Flash video, meaning better quality video will be available to Flash aficionados. Good things happen for those that wait.
If that is the case, I do hope the codecs get a little faster. We're in the middle of encoding a large batch of videos to the Flash 8 (On2 VP6) format and it is taking a long time for each video to get processed, even on a speedy dual-Xeon box.