Flagging an item currently overrides any of the status filters. If it's flagged, and you're in the flagged view, it's visible.
[Edit: Hmmm... completed items which are flagged aren't visible. Arguably a bug. Will file it as such, anyway. :-)]
The view button is disabled because we thought folks would find it confusing if they flagged items and then they didn't see the ones that didn't match whatever they had set it to.
We are planning to do perspective creation in the iPad app at some point - at that point, folks who wanted flagged + <some status> could make a perspective like that.
Email the ninjas and let 'em know you'd like to see that added?