I don't see why it couldn't or shouldn't be. By the way, have you heard of a thing called Newgrounds, or Kongregate?
I have, and they prove my point. Any game implemented in Flash would be better if it were
not. Admittably our computing environment is slightly lacking a proper equivalent of a web game, but that means we should develop one properly, not tack it on a web browser.
It's not that much harder to make a real desktop application that's in every way better than a web game. You can even have it stream all its resources as you run it, just like Flash. You can choose to open executables directly from the browser, etc.
A web browser is a tool not designed for gaming, and it sucks at that. Use the right tool for the job.
Two words, Fantastic Contraption. This would have never been so successful if it wasn't a browser game. Also yes it may be not that harder to make a desktop executable, but several multi platform executables is hard and tedious.
Also with Glaiel-Gamer's point, how to you protect your work from de-compilers? Do you pay for software to encrypt the .swf or something?