Flagged posts go to the moderators for decisions, right?, They get to make the choice. let's suppose there's a user called User A, and User B, a moderator. When User A flags someone's post, User B and other moderators get to act on it. But if User A flags User B's post, does User B still get to make the decision? If they do, I think maybe this should be changed, as it would mean that the one moderator whose post it is could have a difficult time staying fair in their judgement of the post.
What we do is let one of the other mods handle it - it's easier and removes accusations of bias. The good thing is that there is visibility of these through the mods and the CMs, so the audit trail is there if needed.
I guess if the flag is stupid/pointless then we might deal with it ourselves, but generally it's just best to step away and let the next mod handle it.