so flexing is basically for saving the engine from wear and extending its service life
Correct.
By entering an assumed temperature into the FMC you are fooling the engines into thinking the OAT is hotter than it actually is. The system responds by calculating a reduced power setting to keep the engine parameters within limits.
As a point of interest, the B757 fitted with RB211 motors has such a high power to weight ratio that the majority of take offs are conducted using a de-rate, even at very high AUM. It is a requirement within our company that a full power take-off is carried out every so often to ensure the engines will meet target EPR and produce the required performance.
In hot and high conditions you want the maximum power available. It is not uncommon to see spool speeds approaching the red line or even EGT exceed specified limits. The later can often be attributed to temperture inversions whereby the OAT increases with altitude as the aircraft is established in the initial climb. Quite often, the drivers will pull the power back to keep the EGT just inside the limit.