Blind nationalism is certainly bad, but I don't really think that's the reason all the flags are so numerous and big:

• Your average redditor is on r/place and wants to place a dot on something. However, you can imagine they participate casually and aren't joining any of the designated subreddits or whatever to coordinate their effort. So what is the lowest hanging fruit they can do to place a dot?
• They can fix or contribute to an already existing artwork. However, to do that they already need to know what the artwork is supposed to look like. Well, flags are well known and generally easy to reproduce
• In fact, some flags, such as Germany or France, are endlessly reproducable, and you can just keep infinitely expanding horizontally or vertically, contributing to the size of these monstrosities
• But maybe you still want to contribute to something that resonates with you, instead of just a blue corner or a black void. Maybe lots of communities want to put artwork on place, but your average user will still probably resonate more with their identity as a German or American more than their identity as a subscriber of r/aww
• Finally, all of these factors spiral. Maybe a reddit user is a fan of r/HydroHomies, and it just so happens they're making an icon. But the user doesn't know about this because it's too small to pick out, and if they did they're afraid they'd just mess up the design, but the flag of Germany is right there, so might as fill in the bits on the end of the rectangle that aren't straight yet.

TL;DR: r/place is just conducive to flags. also i had 10 mins to burn so i wrote all this for some reason idk