2nd design is just perfect! It follows every rule of vexillology (a study of flags): it's simple, memorable, has meaningful symbolism, and uses a small number of clearly distinct colors.
The art of flag design follows these rules for a good reason. A flag is most commonly seen from a distance, flapping on the wind. It must be instantly recognizable in these conditions. Additionally, a good flag will be often used as a decoration of everyday items: mugs, pieces of clothing, pins, etc., where the same principle applies.
Although NSC flags are rarely seen flapping on the wind, I argue we should use the same rules, for two reasons:
1. For realism, to simulate real life flags
2. For better looking forum icons, and show graphics that use flags in one way or another. Those are good analogies to real world application of flags.
I'm really glad that, with few exceptions (*cough* Kordavian Islands *cough*), NSC flags have been getting better over time.