Gnash is GPL2'd, and the Free Software Foundation has the copyright. So the standalone player can be used by anyone, but the Flash player code can only be used by other free software projects under the terms of the GPL.
Most Flash movies on the Net are older Flash formats, which is why that's the current focus for the near term.
The biggest problem is people realize this is a potentially huge project, as Flash is large and complex. So I think it scares some people off. Most of the other free Flash players haven't gotten very far because of this.