I've also had this conversation with numerous instructors over the years and had very much different responses each time.
If I had an engine failure and needed to sideslip with 40 flap (would be dropping like a brick granted!) to make the only suitable field nearby then I'd do it regardless of what the POH says. I've tried this in my 172 with 40 flap at altitude and the only unusual effect I noticed was buffeting of the tailplane which could be confused with pre-stall buffet.
This was also what was explained to me by a very experienced instructor who said not to worry too much about it and that Cessna were just covering their backside, really cant see it flicking or flipping into a spin unless your being a real plonker on the controls however.
As for a normal approach, if you've got 40 flaps out and still need to sideslip then you really should be thinking about throwing it away and going around....
As for having problems sideslipping, I had a case years ago on my CPL course in a C172 where I just could not get the aircraft to sideslip properly. On the next pre-flight I paid particular attention to the rudder and sure enough I could waggle the rudder freely back and forth to nearly 1/3 deflection each way !