The layer that shows flags is supposed to be transparent in 'good data' areas, to show the data layer underneath. Transparent ('masked image') drawing not yet implemented. High priority.
Workaround: In the Options panel, select 'Show Flagged Regions...' -> 'Masked to Background'. (Flags will be black as in TVFLAG).
-- DavidKing - 01 Nov 2006
Until color flags is working, this workaround (black flags) has now been set automatically for the user.
-- DavidKing - 30 Jan 2007