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Right? I'm not sure if there's a technical solution that would solve targeted bullying without also defeating the purpose of having flags in the first place. Especially since so many people have approximately ten trillion alt accounts.

There could be a committee of elected users with some delegated Steem power from Steemit, Inc. which could decide (in case someone complains) if flaggs are justified or not, and if "yes" just counter them with upvotes.
In addition, accounts who repeatedly misuse flaggs in an abusive way (instead using them against spam, plagiarism etc.) could be flagged, as well, after a decision of that committee.