Preservation of stuff like this is actually done by stitching it to linen or silk. It's done with very fine thread and a stitch every few inches. That supports the fragile cloth. Attached to a linen backing the flag would still drape right, but would be stabilized enough that the tears etc woldn't get worse.
One supplier of the cloth, there are many others
http://apps.webcreate.com/ecom/catal...goryFullID=175
A description of the process is here
http://www.ischool.utexas.edu/~cochi...-textiles.html
Mounting
Items that are fragile, frequently handled, or destined for display might benefit from lining or mounting before being stored. Due to the fact that this involves sewing the object onto a fabric support, this should only be done with the professional assistance of a textile specialist. Improper mounting can cause significant damage over time due to mechanical stress and weakening of yarns in places where the stitches are made. Fairly detailed instructions are given here to aid in identifying any improper mounts that may be already be present. These should be professionally removed before they cause distortion or damage.
The material chosen for the support fabric should be identical or very similar to the textile material so that it will shrink or expand at the same rate as the piece being supported. The support fabric should also be pre-washed and shrunk before use. Threads may be silk, nylon, mercerized cotton, or a yarn pulled from the same kind of fabric being used for lining. Finer threads are usually preferable. Very thin curved needles are normally used for sewing and have less potential for damaging any yarns of the textile object while sewing.
The stitching can be done in two ways. One method is to sew one-half to three-fourth inch long stitches in rows starting at the center of piece and continuing through the entire piece. This allows for even weight distribution across several yarns for each stitch (King, 1985). The other method is to only sew only around the edge of the piece using stitches that are perpendicular to the object. This method is illustrated in figure 3 of Appendix B and is usually used for small, fragile pieces that are being mounted to a fabric-covered paperboard or hard board. If this method is used, the board should be acid free and non-rubber based glue should be used to attach the cloth on the backside of the board only. Before the cloth is attached to the board, the corners can be mitered to assure a better fit. The cloth should be kept square to the board and attached before the object is sewn on to prevent the stitches from pulling holes in the textile object (Landi, 1998). In both mounting systems, the stitches should be loose enough so that the older textile is not strained, but tight enough so that the mounted textile will not move or abrade on the mounting (Landi, 1998 and King, 1985).
If a textile is so fragile that mounting with a needle and thread could potentially cause damage, the sandwich method of mounting may be used. In this method a backing material is stretched over a frame with the fragile textile placed on top. Then, crepeline-silk or polyester netting is placed over the textile and either sewn to the backing material or attached to the frame (King, 1985). Note that a textile should never be directly mounted in an open frame. Objects framed like this are subject to a great deal of mechanical stress. The will also age unevenly because the parts of the textile that are protected by the frame will not age as quickly as the parts that are open to the air (Landi, 1998).
I've helped my wife conserve a few items this way, and it isn't as hard as it sounds. Time consuming, but not hard. And the results are really nice.
Steve B