about a flag and some relics

[RJNorton]

This is not a definitive reply, but it is mentioned in an article on this topic by Dorothy Meserve Kunhardt in the February 15, 1963, edition of Life magazine. She writes about the people looking at Lincoln's remains and says, "There were red spots, too, that looked like vestiges of material, and someone said there must have been a small American flag that had rotted away."

In Stealing Lincoln's Body author Thomas Craughwell writes, "Lincoln's black broadcloth suit was flecked with tiny mounds of yellow mold, as well as bits of red fabric, perhaps the remnants of a small American flag that had been laid on the president's chest and that had since disintegrated, just like the fraying remnants of kid gloves they could see on Lincoln's large, powerful hands."

At this point I am thinking the flag was an assumption or theory people made at the viewing in 1901, but I do not recall ever reading that a flag had (for certain) been placed inside Lincoln's coffin.