Anyway it wasn't all that hard to get the factions right, and now even though I reached the point where all corsair enemies are hostile, and neutrals neutrals, and friends friends, etc... Corsair still isn't flashing!
It really sucks.. Might be something I'm not doing right, but I really don't think it's 100% bugged. Times that it's bug is when you see a player with a faction tag.. but no one else see's the same thing. That's broken for sure. But when everyone else see's the tag, then obviously something is working with the change of faction thing...