Let me see if I can summarize what you are doing.
You have students create questions as part of their assignment. Then, you actually use these student-created questions as part of the course. If any student finds a question that seems to have an error, you tell them to "flag" it. If this is correct, it is an interesting use of the quiz engine. You are basically relying on students to create quality questions. Well, maybe a bit unconventional, but sure, you can do this.
I think that you have seen us say that that is not the intended function of the "flag." John's point might be that some students want to use the flag for its "intended" purpose. I don't know how you plan to separate these two uses, one where the student wanted to flag a question for their own use, and one where the student is flagging a question because they believe it is a bad question and they want to call your attention to it.
I don't get many "bad" questions because I am using the textbook publisher questions, so these have already had many rounds of review. But errors do occur. When they do, I tell my students to copy/paste the question into a forum post to alert me, and if they are correct, they get a bonus point. This method is easy, and it is very effective.
But I don't know if this method would work for you since you might have many more "bad" questions. You have an interesting management problem, both fixing questions and figuring out how to score a student's quiz that might have 4 bad questions out of 10 (for example.) If this student did get 4 bad questions, and answered 5 of 6 correct, do they get a 5/10 or a 5/6 score?
I wonder if it would be better to separate student quiz generation from quiz delivery. Perhaps have a separate assignment where students are asked to create 10 new questions. Then, before using these, a teacher(s) would review these student-generated questions and decide which are accurate and best. I think one goal could be to minimize the number of bad questions in the real quiz.
Getting back to your approach, you might be able to generate custom
SQL and find all questions that have been flagged. If this report is output as an Excel file, then your instructors can use this file to work through the corrections, leaving the original "flags" untouched. (Yes, you still have to figure out if the student is correct, and what you are going to do about their grade.)
There might be other methods, too. I am just trying to help you think through your situation.