It seems to me Gnash should be made available as an app on the App Store. I don't see why apple should reject such a program provided it complies with standards. It's open source so Apple can't complain it might do unexpected things. This would work rather like the youtube application on iPhone.
Some of the emulators are already available through the app store such as the commodore 64 emulator. Also several games like Sonic the Hedgehog are available on the iPhone and these are based on an emulator I believe. Some point and click games have also been released and these are based on the scummvm emulator (which implements, among other things, the SCUMM scripting language used by Monkey Island and so on).
None of these emulators allow users to develop original code however. They all come packaged with specific game(s) and the user is not aware that an emulator is running.
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