Thanks for your response. I had forgot about the telegraph aspect, or imagined most of the lines had been cut. Obviously the news made it out, because there appears to be no doubt that the flag was one of two captured at Helena by the 33rd Iowa.
I have a copy of the booklet, "Confederate Battle Flags in the Collection of the Old State House- A Museum of Arkansas History" that was published in 1988. At that time the belief of the author was that the flag attributed to Dobbin's Regiment was questionable and that it probably belonged to Polk's Corps. It appears they thought the flag was so unique that it wouldn't have been used west of the Mississippi. I'm guessing they were unaware at that time of the duplicate flag belonging to Bell's Regiment up in Iowa. It appears the manufacture of the flags was definitely influenced by someone who had seen those used by Polk's Corps, and just added two additional stars.