Hi Neal,
I'm able to replicate this behavior but not quite how you mentioned. For me, clicking on either of the flag icons works as expected. It immediately turns both icons red, and clicking either icon removes the color from both.
However, when I right-click on an email in the message list and select "Flag", the message list icon turns red, but the preview pane icon does not. I have to leave that message view and come back to it in order to see a red icon in the preview pane.
What's your SmarterMail setup like? Which browser are you using? I'll get this reported to the development team.
Andrea Free
SmarterTools Inc.
877-357-6278
www.smartertools.com