I believe there are several kinds of flags to be used, if you right click on the message, select followup and then select your flag type. I'm not aware of any kind of customization you can do with respect to colors, although I have to admit I've not used that version for some time. Here is a link to a handy quick reference guide you could print out and keep handy. I'll try to setup a system with office XP (aka 2002) to see if I can find more out. I just need something in short supply...time.
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