Any creative ideas?!

could you do some fabic draping on that wall??

how about buying some fabric and just hanging it to cover the whole wall instead of just the flag?

what about covering it up and leaving it flat, and then have your monogram printed as big as possible and glue it up in the center.  If that makes sense?  You will see some seams, but if lights are dim no one would even notice it.

That's sad that they have a dingy flag hanging in there...but none-the-less you need something to cover it. 

I would buy a large piece of fabric and make a monogram yourself.  Simply make a monogram on your computer, have it printed on clear piece of paper (I can't think of the name of it!), rent a projector (sp?) and trace the monogram on to the fabric.  It would not be hard at all.

Or will you be moving into a new home?  You can buy curtains to cover the wall.  Then after your wedding you can use them in your new home.  They would serve "double duty" and thus may lessen the blow of spending the money to cover the poor flag. 

can they take down the flag?

Why don't you cover it in plain fabric and do a moss or a floral covered monogram hung by ribbon in your colors? That would be cost effective.