definitions and misinderstanding
Java is not the internet, nor is flash. It is an application API, not a website. The site loads, we can access it, but the application embedded in it, which is actualy compiled code, will not run wiothout that addition. You can access every website on the iPhone. Whether the site operator chooses to publish in the industry supported HTML versions, or have flash only support has nothing to do with the phone's ability to get there.
btw, IE can not access the whole internet either by the ASAs determination, nor can any browser on earth for that matter, even with additions of flash and a hundred other plug-ins. In fact, IE can't be used at me.com, but firefox, opera, and safari all can, not just apple's proprietary browser. Nothing BUT IE can go to microsoft.com anymore and access actual content without installing silverlight, which is available to noone else.
You can get the whole internet, but you can not get all the CONTENT that's on it that uses PROPRIETARY protocols.
also, flash IS coming to the iPhone soon enough, and I expe ct java might actually get there first. If the iPhone is more powerful that a PSP, and computers less powerful than that can run flash, the iPhone can too. It's just a matter of integrating it so it's not ALLWAYS running in the background.