Drupal Association members fund grants that make connections all over the world.
I have always been using the flag icons from the FamFamFam.com website: http://www.famfamfam.com/lab/icons/flags/
These flags look nice with the little border and anti-alias alike shining effect...
The readme.txt file in the zip files states:
These icons are public domain, and as such are free for any use (attribution appreciated but not required).
So I guess there is not really a problem to use them here?