First a few definite answers:
Yes, you must have the Flex server (a J2EE application,
running in a servlet container).
The last I heard, the Flex server was $30,000 for a four cpu
license. I bet you could negotiate for less though.
Flex 1.5 is very stable
Now, some not-so-definite thoughts:
"Clear migration path"? How high is "up"? You would not have
to scrap anything from Flex 1.5, but the changes, particularly AS 2
to AS 3, are significant and migration is manual. Good AS coding
practice will ease the migration a lot.
If your in-house processes and talent are sufficient to do
the project in pure Flash, then I might suggest that route,
componentizing things as much as possible with an eye toward
leveraging the components in Flex 2 later on. A large part of
Flex's value lies in supporting enterprise level development
processes and methodologies, something that Flash development has
been considered to lack. If this value is not significant for you
then again, the Flash route might be best.