I went through this discussion with a company pilot who was right seat to me during Caravan flight testing I was doing. The company pilot was horror struck when I retracted the flaps from 20 to 10 as I accelerated through the appropriate speed, irrespective of altitude - on a deliberately flat takeoff. He was so shaken by this, he had trouble expressing his concern. I bit shaken myself from his reaction, I went back to the Flight Manual, to be sure I had no missed something important during my first read. Nope, no reference to a minimum AGL for flap retraction, so I had flown the aircraft within the terms of the Flight Manual. He was annoyed when I pointed that out to him. "But... but.. what if you'd had an engine failure...?". "Well, I'd rather enter a glide with less drag, so if the speed is right, I would rather have the lesser amount of flaps extended. I can re-extend them any time I want". He did not agree, but could not present an argument to this logic either. He decided to stop his resistance when I pointed out that the Flight Manual states for a balked landing (which is kind of like a takeoff) to retract the flaps to 20 right after you apply power - not wait for any particular altitude before a configuration change!
The quoted FAR is a design requirement, it is not an operational regulation. The aircraft must demonstrate the stated capability, that FAR is not telling you that you have to fly it that way, just that it can be done.
If a Flight Manual tells you that you must or should, then you should. If the person who owns the plane says "fly it this way" then you should if you want to keep your employer happy. Otherwise, fly the plane safely, operate the flaps within the limiting speeds, and select the flaps as you require them.