In short, I do not believe "flag_needed" is working properly, or it is so poorly documented that people try 1's and 0's instead of plain text (PoAFlag for instance) and once you use the #flags command or quest script to add the flag to the players, zoning in crashes the zone.
This has been my experience while trying to create flagged custom content. Search the source, you can see what values it's expecting.
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