From what I understand of it, the current flag system is to remove rewards from things like spam and plagiarized content, not content you find displeasing. For example, say you have someone posting quality right wing political content and they are voted to nothing because people with opposing opinions want to protest it. From my understanding of Steems rules, this isn't how it's supposed to work. Am I wrong or misunderstanding something?

Disagreement on rewards is the only thing you could argue in your positions favor. However, I interpret that to mean low-quality/low-effort content with big payouts, not disagreements.