You can read the extended discussion in the Indology list (archives
accessable from
http://www.indology.org.uk/
as well as the old IE list that was run by Rich Alderson (archives
http://listserv.linguist.org/archives/indo-european.html)
Note that it would be incorrect to say that Vedic didnot have
retroflexes. The claim is that they would have been allophones
as the conditioning evoirnment had not disappeared yet. This
depends on how you define a phoneme: Sanskrit dictionaries do
not give actual words (but stems which are strictly speaking
abstractions) so you cannot look for minimal contrasts using
dictionaries.