Certainly. But the problem here wasn't "we want flags", but that the client (via the designer) demanded something that couldn't fit in a select box and so we had to build our own.
Now, I think part of the problem is that such elements weren't architectured properly when invented. Like many other HTML elements, they should've had some way to style and/or improve them.
E.g. an H1 Header, I can apply CSS to and change it from the default to something matching the business style. I can add some behaviour to it, so I can bookmark it's id anchor. I can add some behaviour to turn the H1-6 into a nice table-of-contents. Or an image can be improved with some CSS and JS to load progressively. But most form elements, and the dropdown in particular, is hard to improve.
And, yes, I am aware of the can of worms if "any element is allowed inside an ". Or the misuse designers will do if we can add CSS to certain or their contents. Though I don't think "webdevs will abuse" was ever the reason not to hand power to them. It was mostly a disconnect between the "designers of the specs" and the "designers/builders of websites".
Because that "abuse" is never worse than what is still done en-masse: where we simply replace the "select" with hundreds of lines of CSS, divsoup, and hundreds or thousands of lines of JS. Where entire component libraries exist and used all over the place, that completely replicate the behaviour of existing (form) elements but with divs/spans, css and js. And despite the thousands of hours of finetuning, still get details wrong in the area of a11y, on mobile platforms, on obscure platforms, with a plugin, with a slow connection and so on.