It is illegal to display the flag in a few countries. Fact.
Don't ask me for an opinion. I want to know the official view on allowing this illegal content in the countries where it is illegal to display the ISIS flag.
I accept that where it is not illegal to display the flag I just have to take the butt hurt, if the mods have taken the view to allow it on the basis of free speech.
In addition, would you allow it if it was illegal to display the flag in America?
The site is being hosted in the US, so I'm assuming they're abiding by American laws.
I have a question for you though; is CBC.ca blocked in the Netherlands? They're often running stories with images or videos that include the ISIS flag. According to your logic, CBC.ca, or at least the CBC.ca stories on ISIS should be blocked when they're trying to be accessed on a Netherlands IP. Hint: Neither CBC.ca, or the ISIS articles on CBC are blocked on Netherlands IPs. I see no problems with this forum allowing images of ISIS flags, because I suspect if CBC is allowing anyone worldwide to see the ISIS flag, Bitcointalk won't get in any trouble for doing the same.

I don't agree with having an ISIS flag as an avatar, but there's a great ignore feature on this forum so that you don't need to see that avatar, or any posts from that user anymore.