I built this: translate.songbirdnest.com
You don't see flags on the site, but in the language package you download, there are flags. I can't remember if we used to display the flags on the site - it's been redesigned since I left.
1. US citizens are not annoyed by the UK flag. As someone else pointed out, if someone in the US sees a British flag they will probably think the site is not for them. I don't think it works the other way around since the USA dominates international media.
2. We supported US and UK English. The UK people loved this and it was one of the first translations we received.
3. Certain mainland Chinese people are annoyed by Taiwan's existence. Aside from technical errors and categorizations that were simply wrong, the only complaints I received were from mainland Chinese people trying to get me to remove the Taiwanese language pack.
4. Flags look cool but cause some problems with languages that are spoken in different countries, or single countries with many languages. Do you really need Swiss French and France French? Do you need an Indian flag for every language spoken in India?
I actually did have different language packs for the same language in different countries. 22 different kinds of Arabic, etc. However, this was a lot of extra work I made for myself and if I were to do it over again I would not use flags or tie the languages to countries.