Same as Marc except I use 40% Magic Sculpt + 60% Kneadatite. You could take this to 30/70 if you want something very stiff and stronger. I put the putty mix on a glass tile which has a thin layer of cornstarch dispersed on its surface. I then use a clear acrylic roller to roll the putty thin enough. Don't go for the thinness of paper, more like art paper or even a bit thicker. Figure out where you are going to put this to dry before you remove it from the tile or whatever you use. Cut the flag to size right there on the glass tile or whatever. If you want damage to the flag (bullet holes, tatters, etc.) do all that before you remove it from the tile. If you want it to have folds, do that with the flag still on the tile and a dry paint brush or even two dry paint brushes. After it's folded and whatever, I usually leave mine on the tile and let it dry thoroughly before removing. Let it air dry - no heat lamp or slow cooker. You'll get bubbles and/or it will un-fold.
All the best,
Dan