Thanks for "self-reporting" -- I really, really appreciate your thoughtfulness, even if it came slightly after the fact! That is model behaviour that I wish we'd see more of

I was able to find the flag right away and it should now appear as "withdrawn" on your behalf. (That, incidentally, seems to be a new bug in UC 2.0 so thanks for mentioning it!)
To answer your questions:
1) Yes, unless the logo was created before 1923 it's probably copyrighted and ineligible for User Content. It's also quite possibly trademarked, which poses additional barriers to using it in the game.
2) Unfortunately, just adding stuff to the logo is unlikely to prevent any copyright problem. You're always better off making your own artwork, or finding public-domain, royalty-free clipart to use.
Lastly, I had to remove the attachment to your post since copyrighted material shouldn't be posted to our boards.
Thanks again for bringing your questions here!