On the one hand, this is a good thing for iPhone users.
On the other, why on earth isn’t this being offered as an HTML5 web application with H.264 and Theora video, and AAC and MP3 audio?
That way, iPhone OS, Android, the BlackBerry’s new (WebKit-based) browser, and (in future) Opera Mobile would all be able to use HTML5 databases for offline access to articles, inline video and audio players, and the site/app could still provide a graceful feature degradation for less advanced browsers such as Mobile IE (or IE itself, for that matter).
That strikes me as much more in line with the BBC’s charter, and I can’t see what a user would lose by doing this. Google Voice, Google Reader, and GMail (see the theme here) are all excellent iPhone applications that just happen to run in the browser.