It's becoming HTML5 so no need to worry, and with the native app for iPhone it plays like a dream.
Don't expect HTML5 to take over from Flash anytime soon, hell it's not even going to actually be a standard for a good few years yet,
Add in that, taking Youtube as an example, HTML5 doesn't look like it will be able to actually replace Flash anyway, mainly due to not allowing ads in the video, bit of a pain for a company that makes all of it's money from advertising

Note that the app uses neither HTML5 or Flash, but that's the best you'll get on iOS without jailbreaking for a good while yet.
On the original topic, why not go iPad2 for tablet and android for phone? one plus point of that would be the ability to go for the cheaper non-3G ipad and use tethering to get a net connection, just a thought...
I am sure the 3GS won't come up with the HD button because it's not a HD phone. It should on the iPad though!

Well it would be pretty silly if a tech site like Engadget did not offer their content to a pretty large segment of Smartphones...