Flags are not a good idea. It would interfere with all of the PvP play styles. PP, pirate, murder hobo, ganker, etc.
A 4th mode is a better answer. A PvE mode. Imagine Mobius without the player limits. It's unlikely, but far more likely than the real answer. A C&P system that works. To the point that a clean commander in a high security system is unlikely to be interdicted except by the authorities looking for contraband. Still possible to get ganked, but the person that got you will be dealing with ATR wings in seconds and may as well never come back to that system unless they want to face a rebuy and pay their fines. Interstellar factors would be for fines only no bounties ever. Even after the notoriety wears off.
As opposed to pandering to people that RP as homicidal sociopaths, pirates, or don't RP at all, and are just there to make other players go boom? This argument always falls down to the PvE players simply not needing the PvP players. While PvP player, pirates, murderers, gankers, etc. all need other players as victims. So yes, you do pander, at least a bit, to the players you need to make the other players happy. That we are a couple of dozen pages in on this thread should show anyone that. The PvE players are not trying to entice, or force PvP players into solo/pg. It's the PvP players that are trying to entice or force PvE players into open.
I agree flags are not a good idea, a PvE mode is a passable one, but actually fixing C&P, the response, and time it takes to respond, to criminal acts, to the point that unlawful PvP, (piracy, murder, and the like), takes place primarily in anarchy and low security systems, is likely the best answer. Make it hurt in medium sec, and make em cry in high sec.
I will admit I have no idea how to balance that. I suspect Fdev does not either. Which is why I suspect we will get no change, or maybe a 4th mode at some point.