@janetsa, it's of course true that the video stuff is done with C code... in fact very likely there are inner loops written in hand-optimized assembly. That's rather typical for video, even including video played within Flash apps.
My point refers not to things that might be seen in demos, about which we have little information -- even whether any particular one will even be in the final product. It refers to what we can see in the simulator, right now, which consists (I believe) solely of AIR apps.
Now, naturally even things written in ActionScript called upon native routines for much of the work... such is the nature of scripting languages built on top of virtual machines. The nice thing is that you get to call on all that power without having to deal with most of its problems. So, nobody is claiming there isn't native code executing there... nor that there will not be lots of it in the power-hungry parts of the final product. Just that right now AIR has a rather significant role and, even at launch time, that will continue.
[Edit: added missing "not" in second last sentence.]
