Michael Connet suggested to me that we investigate using the 2D vector graphic and animation tools in eToys to develop tutorial animations for the XO. Yorktown High School student Jamie Boisture spent a week and a half investigating Squeak. I followed with a conversation on the #squeak irc channel. Our conclusion: while it may be "possible" to generate 2D animations with Squeak, the conceptual differences between Squeak and flash are enormous, and this is not a practical option for our illustrator, Phi.
To give you an idea of the kind work Phi does, take a look at this. If anyone knows of example animations made with eToys that look as good as what Phi did here, please let us know.