It would seem to me that a soldier who serves in a National Guard unit is making a conscious decision to serve his state. He could just as easily serve in the U.S. Army Reserves, couldn't he?
Why anyone would pick the Guard over the Reserves is known only to themselves or those with whom they choose to share information. I know of one soldier who made the shortest drive to an armory his main consideration.
My son enlisted in the Iowa Army Guard before 9/11/01, and he volunteered for duty in Iraq in 2003 (actually changing units to do so)- on enlisting, he was already aware that the Guard had been "federalized" decades ago, and that active duty would put him under federal auspices ("Uncle Sam totally owns my ass").
The national flag has been good enough for the veterans in this family since 1776. If another family wished to drape a casket with their state flag, I would consider it inappropriate, but I would not quibble about it unless the act was obviously meant to be a blatant political statement to undermine the mission... if an officer simply took it upon himself to use the state flag for whatever reason, then I would consider his "balls" (your words) subject to removal.
And I don't say that lightly.
Uh, he is.