I downloaded wflinks 1.08 from the sourceforge repository last week and am having the same problem with missing country (flag) not showing, although the value is correct in the database table.
Also, the repository copy did not have the the mod suggested by McDonald for wflinks/templates/wflinks_index.html regarding wfllink versus link.
To fix bad URLs in "Other links by" list due to // before singlelink.php part of URL, edited line 103 of /wflinks/templates/wflinks_singlelink.html file. Replaced {$link.module_dir} with {$xoops_dirname} string.
Update March 17, 2011: Fixed broken country (flag) by changing Preferences value for Country Flag Image Directory to modules/wflinks/images/flags/flags_small instead of uploads/images/flags/flags_small. In updating from version 1.06, the default value in the xoops_version.php file changed.