First thing to understand is - unlike for example OGRE, WME is no pure graphics engine, but an (adventure) game engine. Which means - you don't have to care about all common elements of these kind of games, there are ready-to-use (but still very flexible) structures for things like inventories, characters, a path finding system for letting them walk around caring blocked areas, a dialog system, etc. - these are obviously parts you don't have with Flash unless you create them yourself.
You surely can do a lot in Flash and there even is an adventure game engine (LASSIE) for Flash, but when it comes to DirectX support, 3d actors, realtime shadows, fast video playback and after all some easy GUI tools to support the scripting language, you most probably will need a "real" executable.
And that - as a very rough overview and only expressing my opinion - is the gap WME fills.
enjoy!