Yeah - using items reminiscent of the Austro-Hungarian flag also wouldn't work theoretically for a communist regime, but admittedly the map/flags and scenario are more "semi-plausible rule of cool" material than anything else. I think the red/white/black combination being not welcome has to do more with the Nazi flag's use of the colors rather than the original German Imperial flag - again, which was little more than a combination of the Hanseatic and Prussian colors.
To some degree, yes, but also because the black-red-gold has a long history associated with German liberalism including the 1848 Revolutions.