Shawn,
You're right, that's how it probably disappeared ... like a lot of WW2 photos in the Army Signal Corps collection in the NA - they're listed in the card catalog, but they aren't in the photo boxes anymore.
Someone could have gotten that flag catalog through interlibrary loan, possibly, and just never returned it. When I was in grad school I used to get 19th century books and pamphlets on ILL from the LoC. But I sent them all back.