I'm having this problem as well. To make it less annoying, I changed the folder name of NationFlags inside content/gui to something else, like NationFlagsOFF. This gets rid of the flags. This is just workaround though, not actual fix.
EDIT: Sorry, I misread your post. I'm having a different issue, where the game seems to ignore Nationalities I set in CM when setting up a race grid.