Firstly, I suppose, to put a bit of context on my arguments I should mention that I am the author of the software in question.
I agree totally with the comments expressed thus far. Again, as a developer, I am aware of the time, effort and creativity that goes into the creation of many intellectual works, be they software applications, music, or movies. KineticFusion itself is distributed as an obfuscated application to make the process of retrieving valuable IP more difficult(does that qualify as irony?). The intention of KineticFusion is to allow SWF or SVG creators to author SWF using an XML-centric processing model, possibly in conjunction with a visual authoring tool, rather than exclusively depending on visual tools. In order to do this, it is essential that SWF be converted to XML in order to be able to perform proper integration, and also to verify that generated SWF movies were created correctly.
The debate over such decompilers/recompilers will follow the lines of that of that of music-ripping software. The existence of such software is essential to provide for the legitimate uses to which it may be used. But it can also be used to steal concepts and IP that the author wishes to protect.
Flash movies do include a Protect switch inside each movie should the author wish to use it however this switch is purely used as an advisory field and can be removed by any knowledgable user, making it worse than useless (since it conveys the provision of protection while providing none).