You are correct that 4 USC has no civil penalties nor will you find them in most USC’s but none the less it is in violation of the USC. You find civil penalties elsewhere in the laws other than the USC. Are we no better than the BLM or Antifa when we just arbitrarily disregard the USC yet bemoan the BLM and Antifa? That is the problem I see where people just do what they wish and complain about someone else when they do not like what they are doing.
As I have stated 4 USC can be altered through proclamation by the POTUS. What is so hard to understand that for us to be better than the criminals we cry about we must take the lead and do the right thing by obeying the laws of the land or petition the POTUS to issue a proclamation authorizing the display of the TBL flag. To have the upper hand we must be on the up and up.
4 USC is a statute but it has no enforcement power with respect to flag desecration because regulation related to flag desecration is a prima facie violation of the First Amendment. (This question was answered by the SCOTUS.)
As far as flag desecration goes, in 4 USC there is nothing to follow or disregard, it is dead ink.
As you mention, a President and/or Congress could modify or remove the statute, but why would they bother. It has no power and deleting it completely or amending it would inflame politics one way or another.
Thinking about it causally, it may be unlawful to add a carve out for TBL flags because it would be the government promoting speech/expression associated with one political viewpoint while omitting others.
However, expressing one’s opinion regarding the appropriateness or propriety of a flag design that incorporates features from the US Flag is protected.
And, I do generally agree with you here — I am not a fan of vanity flags that are derivative of the US Flag. But I think most TBL flags are sufficiently distinguishable from the US Flag so there is no confusion as to whether it is an official symbol of the USA.
In the case of a public school banning the TBL flag, it is probably a first amendment violation, especially if the school allows other flags in addition the US Flag to be displayed at school or at school events.