I think a lot of people are scared to flag larger accounts for fear of retaliation. What we can do it to delegate some SP to those doing the good work. I expect that's less likely to be traced back, although it's possible to do so.
Milking the system without adding anything useful is very harmful to Steemit. I'd hope that a growing population of dolphins will result in rewards being spread more to legitimate content, but we need the whales to help power the countering of abuse.
I'm not 100% sure that's true. If it was then the account with the highest reputation could never decrease
It is true that lower rep cannot decrease a higher rep by flagging.