Roger, FAR 25.111, I'm sure that CASA have a similar regulation. This however deals with an engine failure at VEF. Now if you can get your aircraft manufacturer to guarantee that you will clear all obstacles in the takeoff flight path if you immediately retract the flaps at V2+X, then this conversation is over. However, none of us have certified data stating this, and therein lies the problem, we aren't looking at this from a purely aerodynamic point of view, we are looking at being able to prove regulation compliance with our operating authorities, or in the event we ever end up in a court room.
Tom, the fact that you have never heard of extended second segment shows me that you have never dealt with the concept of increasing the acceleration height to clear obstacles, we can have the second segment climb continue for almost 10 minutes, with this in mind, its much easier to only have a procedure based on an altitude rather than a speed.
Unfortunately manufacturers usually only certify the data that is required for the AFM, primarily due to time and cost constraints, this leads to things being treated in isolation, they will look at the requirements for FAR 25.111, they wont certify this procedure for all engines. Your aerodynamic argument is good for small aircraft, it doesn't work for larger aircraft, as someone else has posted, it takes them too long to accelerate to the retraction speed.
But the fact remains that one day you might find yourself having to justify your actions, and unfortunately the only thing that you have to help you is the AFM.
It's a shame that some people have taken to emailing you, if we cant discuss these issues, how are we ever expected to learn from our mistakes?
Mutt