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No, there's no way of removing it. However, you should be able to click on things through the flag, if you know exactly where it is. It is a big pain. I didn't even know Iceland was in the game until somebody mentioned it here on the forums!
 
is there any way to remove the crusades flag?

you have to modify the graphic file named crusader.bmp in ...ck/gfx/interface
-just make it empty (fully pure green coloured) (be aware that you cannot see anymore crusade target info)

-or modify/reduce the flag's size (after scaling check if the green right next to the flag is steel "pure" otherwise some ugly fluo green will appear ingame)

also edit (or copy paste) crusade intense.bmp
 
Unfortunately there is also a problem with the most northern part of Finland being hidden. It's really annoying. Zooming out doesn't help as I first thought. but Greenland is also partly hidden even when no crusade flag is up.
 
Why were they moved to the left? Were they getting in the way on the right?