Actually, the flag button shows up if the journal hasn't already been marked as having adult content.

The journal owner can either set the whole lj as having adult content, or just mark specific posts (the second option seems like the better one if someone's actually going to bother with this stuff. When you mark the whole lj, anyone who's not logged in or hasn't changed their settings sees all your posts put under an lj-cut warning for content. Really annoying!)