You are correct sir, it's the recommended way to dispose of the flag period. A far greater offense is to fly a tattered or stained flag which righters do on a regular basis.
"Why are American wingnuts so obsessed with their flag?"
They really aren't, it's a wedge ploy: "we patriotically revere the flag and anyone that doesn't is unAmerican."
Biggest ploy was played by Republicans when Obama got in, They all started wearing little pinned metal flags (made in China) on their suits and insisted the Democrats were unpatriotic for not giving in to the 'new thing'. In rooms with the flag only all over the place, in congress, all meeting halls, offices, hallways and everywhere outside. The righters ate it up, they thought that was a brave stand because they're fucking morons.