I want to use Flash CS5 to design some basic interactive files that I can later compile into apps for Android.
1. Will Flash do everything I need to compile these or is Air somehow still necessary to do this?
You do relize that only android 2.2 devices have the ability to use flash (Flash 10.1 beta), right? This greatly limits your potential market.
At any rate, to answer your question, to my knowledge, Adobe air is not yet available for the android platform. Also, I am pretty sure that the only flash applications that android (or at least the android devices capable of running flash in the first place) are flash web applications (at this point in time anyways. That will likely change eventually).