I seem to remember reading that you should turn off lens image stabilization when using on camera flash? Is that right? If so why?
Generally you can turn image stabilisation off when you use a flash, beacuse it doesn't make any difference.
Some possible exceptions are when the flash doesn't really light up enough so that you still need a longer exposure, or if you are using a long exposure in addition to the flash to catch the background light.
That's not advice I've heard -- you would turn image stabilisation off when using a tripod though, as you can otherwise get a feedback loop.
There's no reason image stabilization and flash should interfere with each other. If you want to benefit from IS keep it on. (However, IS might make things worse when you're using a tripod, as Rowland says.)
You want IS on when your shutter speed is slow enough that camera shake could affect your photo, and when your camera is not securely mounted (ie, a tripod).
If the use of flash causes your shutter speed to increase enough that there's no danger of camera shake, then you no longer need IS. In other words, there's a direct relationship between shutter speed and your need for IS (taking focal length into account). Flash is part of the equation only as it relates to its affect on available light, and thus, your shutter speed (unless I'm missing something, here).
As Matt indicated, just because you don't need IS on any given shot doesn't necessarily mean that there's any harm in having it on.
You might want to keep IS turned on when using studio flash heads. Whilst hot-shoe flash durations are very fast (1/1000s and up) and pop-up flashes even faster, bigger mains powered strobes can be more like 1/200s or longer when on full power, so you will probably benefit from IS unless you're shooting normal to wide angles.
The only argument I think of is to save battery life.