I would guess Apple removed the flags to sidestep thorny geopolitical issues. For example, China and Taiwan will disagree on what flag to show for the language

I would guess Apple removed the flags to sidestep thorny geopolitical issues. For example, China and Taiwan will disagree on what flag to show for the language they share. Also, the article shows two different parts of the UI. For Monterey, it shows the UI for adding a language, for the older OS, that for adding a keyboard layout. That UI still has ‘icons’ (a dark rounded rectangle with letters in it, for example “SQ” for “Albanian” or “USPC” for “US International – PC”) in Monterey.