SASless - The difference is that in the UK there is no equivalent of the US 'Flag Code', so the incorporation of the union flag into items of clothing etc, whilst often tacky, isn't officially a criminal offence.
Ultimately the point is that you are crying foul with regards the 'insult' that was bestowed upon the flag on the United States of America and seemingly insisting that,
.....It is fair to say to the Brits the American Flag is just a piece of cloth. It is also fair to say that to an American it is far more than a piece of cloth....
....when it is quite obvious to the examples that 'Gemini Twin' provided that to many of our compatriots it is just a piece of cloth/adornment for a couch/advertising tool/credit card decoration/etc. The fact you point out tacky uses of the union flag doesn't strengthen your case, it just amplifies the absurdity that is you trying to insist that US citizens show more respect for their flag, when the truth is that many will break a law that the UK doesn't have in order to abuse it.