I've definitely seen flags being misused, in my opinion. I think I've only flagged one post, that I found extremely offensive. While I'm not at all a conspiracy theorist, and I find most of them hilarious, insane, insanely out of pocket, or all three, I don't flag just because I think it's misleading or disagree (I kinda use the same decision calculus as on Reddit, except I vote less here of course).
However, I think all of this shit about censorship is ridiculous, and blown out of proportion, mostly due to the fact that the block chain isn't censored, as you explained. However, when people bring up stinc and flags as attempted censorship, I think it's a misrepresentation. Freedom of speech guarantees protection of all non-hate speech from the government. Companies can do whatever they want, although your opinion on their censorship means you may not use steemit as your front-end. Individuals can do whatever they want as well, and often do, because your freedom to speech guarantees others the same right to call your speech, opinions, etc. stupid and respond to them however they wish.
IMHO, whales can do whatever they wish, but must be ready to catch flags from the multitudes in retribution. Bernie gets all those flags from fulltimegeek and his bots, which in my opinion is a waste of resources, but they're his to use. Unluckily, I haven't seen people bidbotting all the way up to front page getting too many downvotes, but not everyone thinks it's so bad I guess.

I rambled a bit here, but I think I got my opinion on the matter across.

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