Since I was bored and had nothing else to do today, I decided to whip up an adjusted version of the flag myself in HD from scratch:
It's really rough around the edges in multiple places (probably 'cos, y'know, I'm not exactly the greatest artist in the world), but the point here is that there's much more to HD-ing games than getting the original textures and smoothening out the edges. I appreciate that you're really into doing this thing, and that's fine - it's just that you've gotta do more than just smoothen the jaggies to make textures look good innit. Often the point of HD-izing a game is to redraw as many textures as possible whilst still remaining the aesthetic of the original, and that's something that waifu2x can't offer.
tl;dr: creating new art in the same style > just removing the jaggies and such from the old ones through quick and easy means.