Is anyone able to answer if its possible to add more flags there to be used by simply adding the pictures and follow the proper naming conventions? Or are there extra steps?
Without extra steps: Just replace one of existing flags + related insignia icon.
There are no random factions, so this won't affect anything besides symbolic visual.
With extra steps: In case you'd like to keep all of the original flags and have yours as additional option...
1. After you added a couple of new .png images to Starsector\starsector-core\graphics\factions\custom, go to Starsector\starsector-core\data\world\factions and open "player.faction" with a Notepad.
2. In the first part of the config, there is a custom flag list, just copy-paste one of flag listings in the same segment and put your filenames in it:
Spoiler
{
"logo":"graphics/factions/custom/player_logo13_flag.png",
"crest":"graphics/factions/custom/player_logo13_crest.png"
},
{
"logo":"graphics/factions/custom/player_logo14_flag.png",
"crest":"graphics/factions/custom/player_logo14_crest.png"
},
{
"logo":"graphics/factions/custom/my_flag.png",
"crest":"graphics/factions/custom/my_crest.png"
},
3. Save file. Flag will now appear in the game.
I've added my custom design this way, while keeping vanilla ones intact.