You say that the [The palmetto trees on the two flags appear to be cut from the same stencil, the texture of the trunk, the frond pattern, both are so much alike that they must have been cut by the same hand. I have never observed this pattern on any other S.C. state flag. This single coincidence tells me that the red flag in Iowa can be dated to mid 1861 South Carolina.] That's a interesting conclusion, since the trees are very deferent as shown below.
http://s566.photobucket.com/albums/ss108/bagend-Flags/?action=view¤t=Iowa-palmetto-flag.jpg
http://s566.photobucket.com/albums/ss108/bagend-Flags/?action=view¤t=fortwalkerflag.jpg
After the flag act was passed, March 1861, many of the State newspapers and State official correspondence had depictions of the new State flag on their letterhead, one could think that some of the newspapers or official correspondence could have made its way to Alabama and used as the pattern for the flag to have been made in Mobile in 1865 since it actually can only be date to 1865. Textile dating can be as much as 50 years off, any other dating can not be done since errors were made in the process of preservation of the flag.
It would be nice if searchable evidence is found to link the flag to Charleston or any other place in South Carolina, so far nothing has been found and the CHC report only speculates on a connection to South Carolina and Charleston, except that the Iowa's flag is the SC State flag pattern.
Happy Trails!
Tom Martin