The flash is very CPU intensive, and the Atom isn't a very powerful processor. Leopard is also a bit of a resource hog compared to XP, Ubuntu, 7 but Snow Leopard is hopefully going to be more netbook friendly.
Still, even on the leanest setup, you're unlikely going to be able to watch high definition flash.
Its a flash problem though, as you can stream 720P movies over your network or played locally. Hopefully Flash 11 will address this, and if not Silverlight 3 is going to eat up their market domination in no time, as word is the beta is able to use GPU acceleration smoothly to offer better performance for lower powered processors.