Notice that the 19th most favorited post is also flagged. ("Those People We Tried to Cancel? They’re All Hanging Out Together"). To me, that indicates the flagging mechanism on hn is broken.
To me, flagging worked as intended.
EDIT: to respond to your edit, there was an entire thread discussing this in the article discussion. The article should be flagged if there's a problem with the article, and comments should be flagged if there's a problem with the comments.