Ok, since you like the idea, I have been looking at this and I think the only way you can carry the blue squares into the border evenly is to remove the blue border you currently have on the outer edge.
Then make a border of 12 inch squares like the ones you have from the blue and flag, only make them from blue and red
using the military ones in the corners..
Then reapply your blue border around the entire thing and bind with the flags..
What do you think?
I think this would do two things.. you would accentuate the pattern made by the blue squares and
you would cause the red in the center part of your quilt to pop as well.
I know you dont have a lot of fabric to play with, but...
You could make up one blue and red block and lay it in place to see if you like the effect before making a commitment to the idea