First off, disagree with the OP in most regards.
Aside of that, "flagging" is used as a super-broad term and treated like it's all like in Disciples of Rage or Masterminds of Sharn, where you actually are banned to run certain quests without completing others (truth is, you can reddoor most of the quests that needs flagging in DDO),
Also, I'm open and say that I think Curse of Strahd is the worst expansion the moment you look at anything that's not between quest entrance and quest exit (game doesn't respect the expansion's narrative, a vast and beautiful wilderness that cost the devs hours to make has no appeal to be explored, sentient weapon implementation is horrid, gear broke the power system, aasimar have no tie-in in RL or anywhere in the game; to name a few), so bringing it up was already a big minus.
Now onto the more reasonable points.
What flagging does:
- Allows to make storylines work out in specific order and logic: If you did A, then B becomes possible, which is why you get that next quest
- Brings people to actually play the content as intended and designed
- Puts the character and therefore the player into a position of power within the narrative: The only way for the story to unfold is to go through it
- Encourages longer groupings as players are less likely to quit mid-chain
- Makes people open up LFMs as some chains/flaggings are harder than their level would inquire (like lshroud flaggers on heroic)
What devs did to circumvent some disadvantages:
- Most quests can be reddoored
- Most new raids don't need flagging (last one THTH iirc and it came with a [delayed] non-flag raid)
- Sometimes new quests that should be behind flagging to make sense story-wise don't require flagging after all
What wilderness areas do:
- Allows for exploration
- Give each quest a physical context to the place they're happening
- Tell a story without words (if King's Forest were the size of the Gatekeeper Grove, nobody would take it seriously, but this way we can be at awe how much the King owns in forest alone)
- BBEGs and some other NPC do tell a story with words in several of them and allow context within a storyline that can only touched upon within quests without bloating them
- Gives the experience of partaking in the world by traveling it and facing the enemies that are outside the safe walls of civilization
- Stormreach doesn't become Sigil (in two ways)
What devs did to circumvent some disadvantages:
- Introduction of horses
- Teleportation options in bigger wilderness areas (though after RL by traveling to certain areas or completing quests; SM could use a marsh teleporter though)
- Less tricky paths to traverse in newer wilderness areas (though Cogs is half/half imo)
- No raids in wilderness areas anymore, and teleport options directly to staging areas
So I make a counter-suggestion: Add flagging via wilderness area for new quests that uses wilderness maps and add some wilderness related bonuses for the favor (House Orien may be a great patron, and bonuses like +10% traveling speed on and off horse, a mount, etc.). After completing such a wilderness quest, an Orien agent can teleport you to any quest entrance, as the player/character knows the wilderness by that point.