Using flags in your visual design can be tempting but in my experience it's a bad idea. The problem is that certain flags force you to "take sides" in political disputes that you likely aren't aware of and don't understand. You'll inadvertently make one side very angry with you, and you won't even really know what political statement you accidentally made. It's OK if you stick to flags you know but if you start tryin…
Design is all about making decisions, which will invariably make person A happy and person B unhappy (for some values of A and B). Look at how many people are ranting this month about Apple's decision to remove X11.app from OS X, for example, even though you can download a newer version for free. If your goal in building software is to make every person on the planet satisfied, you are setting yourself up for failure. You should make clear decisions that make most of your users happier, not water down all design to make everybody not-upset.
All of the most successful systems today seem to be "opinionated", perhaps not in terms of global politics (usually) but in other ways. Being more clear to the vast majority of your users probably has a lot more value than not upsetting the less-than-1% who probably are even less than their share of your revenue, anyway.
Besides, in my experience, more important than getting it right is being responsive. If you're concerned about getting it wrong, then just put a link next to it that says "Did we forget / screw up yours? Tell us here: __". Then you will have actual data about who's coming to your particular page and what they want to see there.
Or, you can pick a relevant ISO/UN/EU/... list, and say you're using that for country names and flags. That may or may not be biased, but it removes you from the decision. If somebody is so mad they refuse to use your program because they don't like an ISO/UN/EU list, I don't know how they got past the Time Zone Setup screen on their computer.
There's people who will get upset if you say there are 50 states in the USA. They can believe what they like but I'm not going to lift a finger to accommodate them in my software.