take a look this was done for an online banner ad for the west wing dvd set. where it appears half the size and at 20% opacity.
the entire flag and the up and down movement is create dynamically.
the movement on the edge is done with a tweened mask.
if you look at the code it is not optimized yet (cause i am a sloppy coder and i always go back and clean things up at a later date).
