My husband died while in active service and I don't understand why Hospice would think an actual flag would be disrespectful. I would suggest you have your local Hospice administrator contact the national Hospice organization, the Veterans Affairs office as was earlier suggested, and possibly the funeral home. Surely someone has previously done whatever it is they are planning and these decisions should not be left in your hands. Hospice should tell you specifically what it is they want. There's a lot of ways to go wrong on something like this, so it would probably be best to be sure you are right.