Re: US Flag display on private yachts and boats in another country.
One of the major problems with the flag code is that it does not address maritime usage at all -- it was originally based on Army regulations. As Nick points out, maritime flag etiquette is very different, and this causes a lot of confusion. If they ever decide to revise the flag code, this would be a big item to consider.
My impression (although I can't back it up with a refererence at the moment), is that the courtesy flag is normally flown at the starboard yardarm or spreader on the forwardmost mast, or at the mast head if there is no yardarm or spreader.
Peter Ansoff
"We live by symbols, and what shall be symbolized by any image of the sight depends upon the mind of him who sees it."
-- Oliver Wendell Holmes, Jr.