Here's my two cents. Keep in mind that this is just my speculation/rambling/etc. so don't take it to heart/seriously.
I've looked into getting Flash playback on the iPod before in the past and the only suitable project I found was Gnash. Gnash is an open source, GPL'd replacement for Adobe's web browser flash player. Its written in C++, uses GTK+, and can be cross-compiled. I've ported simple GTK-to-hotdog before so that's not an issue, and from what I've read, Gnash _can_ be cross-compiled for the ARM-architecture.
One problem. It's
slow. If it has troubles running on a 200MHz processor (assuming everything is done through software), unless you did some crazy hacks (i.e. at the level of the iBoy) or ARM-specific optimizations (that you should definitely create a patch for and submit to Savannah), there is no way for it to run at an acceptable speed on the maxed-88MHz iPod processor (even if you somehow use both processors). If you actually ported a different Flash player, I doubt it'd be more optimized than Gnash assuming it is open source (if it's not, we do not encourage closed-source applications here).
Porting aside, you also have to take into account usability. What type of Flash applications are you planning for your player to play? If it is Flash videos, I personally do not believe it to be worth the effort - just use mencoder to convert the SWF to some common video format, then convert that video file to an iPodLinux-playable format (i.e. raw AVI, MvPD, Rockbox's mpeg1 or mpeg2). If its actual interactive games you are wanting, keep in mind the difficulty of input-control and, of course, speed (i.e. don't over-estimate the tiny iPod's processor power).
Remember, just because something _can_ be ported doesn't mean it should or it's worth it. In my port-ing rampage a while back, I ported a few apps that I later scrapped due to un-usability. The original NetHack was easily portable and definitely something people wanted. I ported it in under an hour. Then I realized how impractical it was due to difficulty of command input and the iPod's tiny screen. So I scrapped that. The Neko98 (I think that was the name) project that was the PC-98 emulator. I wanted to play the original Touhou on my iPod nano. After a day or two of modifying the source code, it compiled and ran. At a few frames per second. Completely unplayable. I was quite disappointed.
Cross-compiling? Doable. Making it run? Slightly hard, but do-able. Making it work? Lots of hacks probably needed. Making it work fast and usable? Good luck ; (
Again, just my two-cents. Take it as advice or a comment, but please don't take it as discouragement. Contributing to open source is always a good thing, but you do have to analyze how practical some things are. But then again, I could be shown completely wrong ^_^
~Keripo