Well, if it isnt illegal then it should be.
btw, from what I've dug up. 'Should' means that there may exist valid reasons in particular circumstances to ignore a particular item, but the full implications must be understood and carefully weighed before choosing a different course.
The way I see it, spirits and ghosts telling people how to display the flag of the United States of America isnt what I would consider a valid reason.
Now, if on the otherhand 'may' was used in the wording it would truly be considered an optional rule. But it doesnt, so they should take it down and display it IAW U.S. Code and seek professional help.