Flags are a necessary part of Steem.

Today, maybe, but if the appropriate conventions get established, I don't think they need to be. I think that comments, the mute button, and up-vote removal can all interact to solve any problem that down-votes can solve.

For example, someone could comment on a post: "I think this post is plagiarized. Here is the original: [link]." Then, voters who think that it's important to avoid voting on plagiarism could evaluate the claim and either refrain from voting on it, or go back and remove their up-votes. This comes with a couple additional benefits, in that authors would be able to dispute the accusations, and up-votes to reward comments that identify plagiarism might even create a bounty system to incentivize discovery. Of course, the vote removal could be automated as certain accounts establish themselves as trustworthy plagiarism finders. (I wrote about that, too. here).