It is a true crest and seal. I think I figured out why some of the older ones have lifting inlays.

The inlay of that flag is made up of a sandwich of paper and cellulose nitrate (celluloid). I don't believe that the combination is compatible. There is stress in the celluloid and, over time, warps. Later on USPC made the inlay sandwich out of celluloid and celluloid. This produced a stable inlay. No warping.

Often times the lifting inlay chips have stains. This is reasonable since the litho is printed on the paper and the lifting inlay breaks the seal protecting the paper underneath.