A somewhat counter-intuitive observation but it appears that a player or a monster with a low DEX (say Dex of 8 for a -1 modifier) would have a higher flat-footed AC than regular?
i.e. when denied their DEX they would not take the -1 penalty to AC?
Have I missed something? Or are creatures/PCs with that low of a Dex so clumsy that they are actually harder to hit when they aren't engaged in combat?
I'm pretty sure they take the AC penalty even when they're flat-footed.
Yup, as David Haller said, you need to be very careful when the rules say "bonus" and when they say "modifier". Due to use of the latter in the alchemist throw anything class feature, a feebleminded alchemist is actually much worse at throwing alchemist fire than a commoner, for instance.
This not-uncommon area of confusion stems from careless application of jargon: we often refer to the state of being "denied your dex" when what we more precisely mean is "denied your dex bonus".
Bonuses and penalties are not features of algebraic numeration - that is, a penalty is not a negative bonus. They are totally different entities (as witnessed by occasional differences in stacking mechanics of penalties and bonuses).