not sure how to phraze this as a suggestion but ill list the problems as i see them

1 when there is a yellow flag it over rides the blue flag message, only really noticed this the other day when htere was a run of crashed cars on bl for about 1/2 a lap and it was only by noticing the map and the yellow dots that i knew i had a leader coming up to lap me, i could imagine a situation where the leader would be screaming "blue flag" and the car in front wouldnt realise it was at him.

2 yellow flags can appear on your screen when there is no longer an obstruction due to people pitting or regaining track. the first bend at ascot seems to be a favourite for this. also when you get a car that hasnt moved for ages and is well off line you still get yellow flag. this causes 2 problems:-

1 after a while you tend to mistrust yellow flags and maybe not take as much care as you should

and

2 if theres is a yellow lap after lap and you know theres a car way off track, you could get caught out by a fresh accident on the next lap as 1 parked car or 15 seperate crashes still mean just 1 flag

finally sometimes you can get blue flag warning but the car in question can take over 1/2 lap to get close enough to pass. obviously in ideal world backmarker would let car past as soon as they are close but when it takes this long it can be hard to judge when you need to let them pass.

no idea how to improve these situations but thought i'd throw them into the mix

Also a lot of slides trigger yellow flags, even though there is nothing dangerous to them.
The flag-system was said to be on shedule for a review sometime until S2 final, as far as I know.

Vain

I'm not sure but I think the yellow flag appears if there's a car that either has left the track, or that is driving X % slower than the AI would drive at this section.

or have a white flag for that, I often smash into the back of a slow moving car because I'm concentrating on the corner ahead

Yellow flags should override blue flags....

First of all...

You are not allowed to overtake when under a yellow flag, not even if you're lapping another car... So the yellow should be visible and the blue should be halted when the yellow is out.

Secondly, the blue flag serves as a warning to a driver that a faster car is behind him and he should let him pass without problems... It is up to the backmarker to choose when and where to do that. The blue flag does not mean "get the heck away from the line now!", but merely means "look in your mirror and watch for a faster car wanting to pass you". Also, being shown a blue flag does not give the faster car the right to pass anywhere he/she would like... It is the right of the backmarker to choose the spot (within reason) and the leader should wait for this moment. Normally, when a car is within overtaking distance (that is, being slowed down because of you being in front of him) you have 3 marshall stalls (flag positions) to let him pass. It usually only takes 1, or 2 at the most to find a good spot.