argh, i have the be flag model on top of a building and it animates in hammer yet in game it is perfectly still. I have tryed tying it to every prop entity i can find and the damn thing still won't flutter. Only 'lead' i have is that maybe i need to name a default animation for it yet i have no idea where or what this animation file might be.
Go in the model browser and check the sequences tab for your flag model, it should be under there, or alternatively, select the 'model' tab in the object properties window and then use the drop down to find all animations associated with that model. You will need to enter the relevant sequence in the default animation k/v.