How to recover flags in Mail.app?

I'm not sure this will do what you want. Quit Mail. Go to Finder and select your user/home folder. With that Finder window as the front window, either select Finder/View/Show View options or go command - J. When the View options opens, check ’Show Library Folder’. That should make your user library folder visible in your user/home folder. Select Library/Mail/V4/MailData/FlagMailboxes.plist. Try recovering that file from your backup. Reopen Mail and test.

This is a simple manual method , I applied in my system and then answered , you also asked about preference file in library etc , so from which library system library or user library , when manual method works what other recovery method is to be searched ? 🙂

Select all mails ( press command and A on the keyboard ) , take cursor on the top menu bar message > Flag > click the desired flag , all mails will be flagged .

Please read this article see if it helps How to rebuild the Spotlight index on your Mac - Apple Support

You are welcome. Did you try restoring the file and then restarting the computer? Preference settings get cached and a restart sometimes will clear the cache.