Yeah, I vaguely remember dang saying that they might consider allowing users to unflag posts, but I think he did confirm that currently flagging cannot be undone by non-moderator users. Currently the site errs on the side of flagging for that reason. I think there was a tweet from pg saying that they were talking about the possibility of giving unflagging rights to karma users with dang, but I'm going completely off memory here.
Genuine question. I have always wondered about this.