According to the Star Tribune:
Some churches fly the flag as a reflection of patriotism and pride in the gift of freedom. Some decline because of a belief that no national symbol should supersede religious symbols. Still others compromise -- they display the flag, but in inconspicuous locations.
A certain amount of controversy surrounds the display of the national flag by churches, said Joseph McMillan, a political scientist and amateur flag historian in Alexandria, Va., and an editor of the Flags of the World website. Often there is no way to display national and church flags without one being in a subordinate position -- right vs. left, above vs. below -- and that creates a dilemma, McMillan said.
"The question of whether it's theologically appropriate gets tangled up with a whole range of political matters that are not necessarily related to the theological issues," he said. "Many clergymen ... object to the display of the national flag in the church or on church property because they think it muddies the church-state distinction. In some cases, they believe the presence of the flag implies that the church is under the jurisdiction or control of the government. In others, they believe it implies that the nation is being put on a plane with God as an object of worship."
But many Americans see the U.S. flag not as the symbol of the government, but of the nation and its people, McMillan said. For many congregations, displaying the flag is a reflection of patriotism, social conscience and a statement of their opinions on political issues. "They therefore do not perceive the U.S. and church flags as symbols of competing church and state but as expressions of two facets of their identity: 'We are Christians; we are Americans,' " McMillan said.
If it were simply a matter of "two facets" of people's identity, it wouldn't be such a contentious issue — people would be able to agree that the flag shouldn't necessarily be displayed in churches. Not ever facet of one's identity gets equal promotion everywhere in their lives, right? There is a time and place for everything.
People want the flag displayed — and displayed prominently — at their church when their identity as Americans is perceived as tightly bound to their identity as Christians. The flag belongs in church when being an American and being a Christian belong together.
The fact that so many American Christians see being an American and being a Christians as intertwined is one of the problems with American Christianity. It's a problem that is particular to the Christian Right, though — liberal to moderate churches tend not to have this problem. It's the Christian Right where patriotism has become bound with Christianity and this flag debate is one facet of it. I'll bet you would have a high rate of success in guessing the orientation of a congregation based upon whether and where the American flag is displayed.