I would use the stitch with the smaller stitches on the upright part. The stitches are tighter and less likely to come out.
My machine can also do two stitches for the flag part. It takes a while to do as it back stitches over stitches. Binding takes longer.
Take a sample piece of fabric layered with batting and try the different stitch lengths. I like to use the longer and/or wider setting to avoid any puckers along the stitch lines. Use a piece of muslin and mark the different samples. Keep it for future reference.
Have fun & show us pics!