I'd rather the flag be done away with. A flag is supposed to mark something so that someone can later come and review it, that doesn't happen.
Rather than flags, it should be the community that decide whether a post is valuable. If the accumulative weight of downvotes outweighs that of the upvotes, then the post should be made invisible. But, no payout or reputation should be effected until the payout cycle ends and some sort of calculation is done based on the communities upvotes/downvotes.
I also feel that while payout should be tied to STEEM Power, this particular sort of thing should be tied to Reputation.