Is it possible to put cloth on object/props? I'm thinking of the CTF flag, which is that black pole but then the yellow flag part seems to be made of cloth. Is that possible?

In a word "yes"

In a thousand words
In a million words

That's....I mean....wow....

Is it possible with XSI Modtool 6? And if so, is the process more or less the same as it is described in the tutorial here at GT?

It's not possible with the Mod Tool since it can't export stuff via the Pandemic Tool.

Oh, wait, is it possible to make it in Modtool and then ask if someone with the full version could export it?

That is totally possible, all they have to do is in the create cloth part is assign the fixed points
they don't need to provide collision geometry or envelope it to anything, like they do for cloth on a unit.

Ah, ok, but another question regarding cloth: how do you make it fly in the wind like that? I thought BF2 has no wind. I'd assume a straight cloth on objects would hang limp.

From a cloth document that was posted here or Fred's site, can't remember.

And those go in the ODF?

yup

particle mass doenst seem to work for me