Well, Avalon will only run on Longhorn machines, so Flash is not threatened by that for many years. There will always be a role for cross-platform graphics, such as SVG, as well.

I think the problem with flash is its focus on activex controls and macromedia-centered development tools. If you want to create animated vector graphics with .NET tools and languages you have to use something like VG.net -- activex controls are on the way out.