Thank you! I can't tell you how many vexillological arguments I've had to listen to about this subject.
If I'm reading the photos correctly, these flag handles seem to be some kind of flat print, covered with clear acrylic. There was a company (Novelty Cutlery, Canton) back at the turn of the last century, that sold knives with custom handles using photographs under celluloid. Sometimes wholesome family photos, sometimes more risque subjects. So yes, it seems like a novelty souvenir, but there's also a legitimate nostalgia factor. How cool would it be to have a GEC with your own choice of image under the looking glass covers?