And regarding my question, I've learned that flagging a message in Outlook, although it shows up in the To-Do bar does NOT make it a task in outlook. Instead, the preferred way to do that is dragging it to the Tasks icon (left side near folders) and this makes it a task. So the Sync app was correct not to include the flag as a task since flagging doesn't make an email a task in outlook, it just looks that way.
I've been looking for a good option to get Outlook tasks to my iPhone. Unfortunately it took far more research and time than I would have preferred to find Toodledo and your sync tool. Great news is once I found it and installed it ... it worked perfectly.