I'm worried of backwards compatibility with files especially..

One thing with flash is that firstly, it is not a standard endorsed by w3c. Heck in that sense, even AJAX would be better. This means that not every browser comes with the latest and greatest flash plugin, and you will periodically need to update it. As etsuko said, backward compatibility would be a nightmare to non-tech savvy users. Secondly, with each new iteration of flash there's bound to be new features added in, and these features does not have a roadmap. This means that the general public doesn't know what to expect from the newest flash version.

Will these two attributes hurt flash? With the wide variety of browsers, platforms and machines that we have today, what do you think?

To the general public or the average visitor, they don't really care about what's bundled in the new Flash. To them, it's just about being able to enjoy the experience or have a friendly experience with your website.

That said, I think that Macromedia might need a new take on promoting Flash to the world instead of just being video importable, look nice and flexble, supports backend integration and techy stuff.

What Macromedia maybe needs is to educate the public on why Flash is the future..