[geoschmo]

Ok, I ran some tests myself on the flag directory. In the stock flag directory there are Alliance### flagsets, Race### flagsets and Simul### flagsets. It appears the game is hardcoded to ignore the "Alliance" and "Simul" flags when you are setting up your empire, but it does give you the option to use the "Race" flags. It will also allow you to use any flag sets you put in this directory that don't start with Alliance or Simul. You don't have to follow the Race naming pattern.

Also, if you have a flag set in the flags folder that is the same name as one of the Empire folders, it will only give you the flag option once, rather than duplicating it. I think was addressed in one of the patches, because I seem to rememeber at one point a problem with duplicate flag sets showing up in the empire creation screen.