I think you pointed out very well why it hasn't been used more: lack of durability. Either it has to be some kind of plastic foil, in which case it has to be thin enough to fly in the wind the same way as a traditional flag does, so it will degrade very quickly when exposed to the elements. Or the silk organza suggested on the page, but if it's thin enough to be (almost) transparent I'm not convinced that it would fare much better.

So, nice idea, but completely impractical, which makes it a gimmick.