Flag Animation - WIP

A work in progress waving flag animation. Eventually you will be able to write flag(Country,x_position,yposition) e.g: flag(GBR,5,14).
This version currently shows the UK and USA flags. Currently they are following a sine wave with a controllable frequency; although in further versions I may make the flag movements more random and realistic. This will not be open until I can figure out the issue below.
All of the coding aspect is finished now what need to be done are the different countries flags. Unfortunately this is where the difficulty arises.
The flags I will be using come from the International Olympic Committee members, this is currently 204 countries. The lua object only allows 128 by 128 pixels, a standard flag ratio is 2:3 and there are 204 IOC countries flags. The standard resolution when drawing pixel flags is 10 by 15, if you take the area of all of the flags it comes to 30600, the amount the lua object allows is 16384. A little over half of what is needed. The (nearest integer) resolution that will fit the size is 7 by 11. This resolution isn’t high enough to get some of the details that certain maps use. Also it means I would have to design all 204 by hand. These are the flags I would be using http://i.imgur.com/ZPT1n.png
So the options are to either not include certain countries, although I fell this would cause certain tensions. The other option being the developers increase the size of the texels allowed. With that option I’m afraid of lag being an issue. Also the developers have stated that 128^2 is plenty. So at this point I am open to suggestions.
As always I am open to suggestions and input.