I don't think there's a need to use a service flag for this. We could just bump the P2P protocol version number to support extended-length addresses (though we should do things like cjdns at the same time; I'd also like to see host keys in the protocol, but that's a far larger change).
If I understand correctly you talking about PROTOCOL_VERSION constant in version.h.
My first thought was change version of protocol too, but I rejected this idea.
At now protocol is 70001. Let's sasy we increased version of the protocol and our protocol is 70002. But the bitcoin developers release a new version of bitcoin with protocol version 80000. So I have to increase it again, or my client will send to a vanilla client too low version and the vanilla client may reject a connection from my client. At new version I'll have to increase again and again and again...
Let's say we strongly increase version, for ex. 999000. At this case we don't need to increase it every time as the bitcoin developers release a new version. But there're potential vulnerability, if the bitcoin developers implement a new super feature in the protocol.
For ex., they released following code
if (pfrom->nVersion > MIN_PROTO_SUPER_FEATURE_VERSION)
{
SendToPeerSuperFeatureInfo(pfrom);
}
where MIN_PROTO_SUPER_FEATURE_VERSION == 70001 and pfrom is my patched client. In this case my patched client send to the vanilla client version 999000 and this condition become truth and the vanilla client send to me (or wait to receive from me) some info, but I don't have this info and I don't expect it, because my client is not support this feature yet. This may cause an undefined behaviour of my client.
In any cases I have to increase version of protocol or change my code if the bitcoin developers change version of the protocol. And if I will do that ASAP, users of my patch still may not be updated for a long time and be threatened.
So I found the only way to be in safe and do not change proto version every time is a new service flag. In this case I can make automatic merging with main bitcoin tree, and don't afraid of any problems with protocol.