Why does this woman feel a need to make such a big deal about it?
Excellent points and excellent research. I'll try to answer as best as can be expected when one person attempts to answer for the motivations of another.
At the outset let me say that if I were in her position, I don't think that I would be doing what she is doing. Although I'm not a mother (I'm merely a guy) and I'm not a parent and so it's hard for me to categorically anticipate my response to such a situation, in general I'm not a 'showy' person. I don't do bumper stickers, I don't march with signs, I don't wear "statement" t-shirts and I don't do yard signs during elections ( I live in the People's Republic of Seattle and my concern would be that my house would be burned to the ground in this "enlightened, progressive" city). I do, however, make an effort to be as educated on politics and issues of the day as I can, time permitting, and I vote at every opportunity and I support select organizations financially. My guess is that if I were in the same position as the lady in this article, I would most likely want to do something in a bit more reserved manner than the method that she chose, perhaps something similar to the example shown by your photo..
That, being said, there are a few noteworthy differences between the WW1 and WW2 eras and today. Among the relevant contrasts are our society, which encourages a public exuberance far more than the more modest (and in my view, far more dignified) times of the past. Many people consider it to be perfectly acceptable to take their most intimate and personal troubles to Oprah or Jerry Springer and broadcast their pain and dysfunctions to billions of people whom they don't know. I don't mean to imply that this woman is in any way related to a Jerry Springer guest, but the vocal media culture that we all live in creates an environment where different modes of expression become more commonplace, for good or for bad.
Another difference is in architecture. Homes of the WW1 and WW2 eras were far smaller (particularly in Great Britain) than they have been in the USA. In past times only the wealthy would have giant homes set hundreds of feet back from the street, but that's fairly commonplace in the US. The smaller homes were oftentimes closer to the street where a smaller flag in the window could be more easily seen by guests and passersby.
Ultimately it comes down to a person's personality and what's important to them. Although this woman's choice of expression would probably not mirror my own, I found it unfortunate that the Neighborhood Association gave the rationale that they did, which would also preclude even a smaller sign such as what you and I would tend to favor.