The waving flag, (and some other animations in Openscenery), requires the Sandy Barbour Plugin, CustomSBDatarefs004 plugin, to wave and work correctly. You can get it here, http://www.xpluginsdk.org/misc_plugins.htm, (scroll down the page a little). It is available for Mac, Windows, or Linux. I use it and have never found it to interfere or be incompatible with anything so far.