Go to the \gfx\map folder
In the "shields" folder are the flags used when starting games and during diplomacy.
In the "flags" folder are the flags used by the units. They are a long line of flags after each other, they are the ones being displayed for the units (one after the other so that it looks like the flag moves).
Take a backup of whatever you wanna edit, then start editing away with MS paint or whatever you use to edit .bmp