Nasty!
The demo took out Firefox 3.5.7; and upon a reload all the tabs came back which meant, potentially, the browser could have kept dying as soon as it was restarted. Thank goodness for NoScript!
I'm not worried that Flash crashed (I'm not even surprised). What I do find to be a worry is that it took the browser with it. The browser should be written to expect plugins and addons to do stupid things as a result of clueless design. Ideally they'd be sandboxed, but I understand this might make an unacceptable lag in performance (though, security-wise, it mightn't be a bad idea). They should at least run as a separate process with reasonable time privs and the bare minimum of system privs.
The most annoying thing of all, however, is that I couldn't kill IE8. Running this in one tab would result in the tab "recovering" itself. So I got smart and tried a second tab. This caused a fatal error notice to appear, but after okaying it, IE8 would not die. The second time disappeared and reloaded. And this is where things got interesting. Further attempts on the demo site would either result in the site with the bad Flash simply omitted (it is to the right of the first line, not the big blue square), or I'd be taken to the following local URL which is something of a hint:
res://ieframe.dll/acr_error.htm#dempsky.org,http://flashcrash.dempsky.org/
I can't believe it. Score one for IE. O...M...G...!