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The use wasn't "illegal" it was inappropriate. There are way's to handle the flag, adorn clothes and other tangible items with it. Since the end of the world war's was still only a decade past there was much hoopla around the flag and it's use.
Since the late 20th century less favor is shown on "preserving" the value of the flag in it's different uses.
I"m 32 and no expert; but I watch the history channel and have stay'd at a holiday inn before!!
JK
Here a link on Flag etiquette, can't say for sure if it is all true, but still interesting reading. Flag Rules and Regulations