am told that it is a form of Kanji that no one can read now. The later I find hard to believe,
Your instincts are correct. There is nothing particularly unusual about the forms of kanji (after all, this was only written some 70 years ago...its hardly the same as reading Egyptian heiroglyphics). The only thing that makes it slightly difficult about
some of the writing is the cursive way in which some of the people wrote - it would be the same as any handwritten message in the US.
Here are some of the names and messages that are fairly easy to read
Takashima Kunio
Tomisawa Rokusuke
Wada Kameo
Uchida Yoshitsugu
Sakamoto Kiyoyoshi
(some names have multiple possible readings that aren't apparent from looking at the writing alone) .
Some of the slogans on the flag are;
Pray for certain victory
Pray for everlasting good luck in battle
Congratulations on advancing to the front.
The names on the flag are very common names. It is a bit like tracking down someone named Tom Brown, John Smith, Paul Johnson, etc... The Japanese consulate and embassies in the US are helping to repatriate flags like this to their original owners. I can't find a dedication on this flag, so I don't think we (or the embassy) can determine who the original owner was. There is also a non-government agency that is helping repatriate flags. Check out the links below;
Repatriation of WW2 Artifacts
www.boston.us.emb-japan.go.jp
OBON SOCIETY is a non-profit humanitarian effort dedicated to the pursuit of peace. We provide opportunities for reconciliation between families through the return of personal items taken during war.
obonsociety.org
etc.