This PV is clearly not created or supported in good faith as the same people calling for these changes were against changes that would only effect neutral players. I very much doubt it would have been created if the cadre of neutrals weren't that great at pvp, or they weren't grouped up into a guild.
Regardless, I think you are going about this the wrong way. Instead of nerfing (not fixing, let's be honest with your intentions) neutrals, buff the others. 1 min flag up and down for rebs and imps, no flashing. If we wanted to approach this from a realism standpoint, like a previous post did with a comparison to viet cong, this would make sense for non-uniformed factioned players to not give out some big warning that they're about to attack you either.
While we're at it, let's remove the intel pad and give SF flagged players an incentive to stay that way regardless of what they're doing. Say if you're flagged you get an opportune chance buff, helping you get drops in pve. Currently with the intel pad people still would not flag SF just running around because they will be pretty much instantly hunted. Without the intel pad people would be more open to being flagged all the time, but it is a double edged sword because the intel pad can make pvp that otherwise wouldn't happen. That said the biggest fights seem to have either been orchestrated between the two parties or at city invasions anyway.
Or, you can change nothing since this complaint has an expiration date. The people "abusing" this, as it's been put, only do it for more pvp, not just to have some kind of advantage. Their intent was to be able to flag reb if there were imp players or vice versa, but only rebs are flagging up at their active times. If no third faction is created, they will go reb or imp when officer ranks with permanent sf flagging are released for the permanent flag as well as the buffs that come with the rank.
If anything, you should advocate for a third faction with officer ranks so you can gang up on these evil neutrals with the opposite faction. Then everyone will be happy.