I disagree with very little of that - it's all quite self-evident to me.
(The only quibble might be that once you invite characters to get rid of flaws, they do - and that can detract from the main story line, and become the story for those characters, rather than something else more universal or over-arching. Hard to fully concentrate on the necromancer in the swamp when you only want to get rid of that personal Enemy, who has nothing to do with the story's BBEG. Not impossible, but it's game-time that is spent for development of just one character, instead of the saga itself.)
But the point you seem to be overlooking is that a character who overcomes flaws then has less, and so is, then, by your own explanation, not as complex as one who has flaws replaced with other, equally interesting and equally complex flaws, flaws that then guarantee the continued "longevity" of complexity and interest.
That's possibly a problem, I suppose. One solution to make sure, before play, that bits and pieces like personal Enemies align with (or are allied with) the BBEG. I.e. make sure that the "story" actually involves the characters the troupe has made up.
I'd also say, it really depends on the attitude of the troupe as to what counts as "story". I would actually, be happier concentrating on the story of characters dealing with personal, meaningful enemies, and with The Necromancer in the Swamp being a prop, scenery, or context to the actual story that is being told. For example, I'm watching Generation Kill at the moment. Which is great. It's set in the Iraq invasion, but the actual story is about the interactions between the characters in the Marine platoon.
That just means that the story is over. Kill/retire the characters, and make some new ones up. Tell a new story.
The point of Flaws - and of limites on Virtues - is to create reasonably balanced starting characters. It's also to add depth to characterizations, without in the process giving one character an advantage over the others. It's not because human beings inherantly all have the same number of pluses and minues and that that number never varies during their lifetimes. In other words, it's a construct for gaming purposes. If the troupe agree that everyone should have 5 virtues and no flaws, or 2 virtues and 5 flaws, that would be just as justified as the default system.
It shouldn't be easy to get rid of Flaws, otherwise they don't serve the purpose of game balance. On the other hand though, we shouldn't let a concern for the character creation rules restrict us from letting characters develop during a story.
In my games, a character can lose a flaw with about the same amount of effort necessary to gain a virtue (or some other advantage) of the same magnitude. I don't see why a flaw lost through effort and stories should be compensated with a flaw gained - any more than a virtue gained through effort and stories should be compensated by loss of another virtue, or than a spell learned through study should be compensated by having the magus immediately forget another spell to "preserve balance".
I also do not see why having a character strive to overcome a flaw may hurt the story by "distracting" the character from the main plot. If that were true, characters should not be encouraged to have story flaws at all, because they distract them from the "main" storyplot. No, it's up to the Storyguide to try and weave from the different desires, virtues, flaws etc. of the characters something that will tie them up.
I suggest you (re?)read p 36, par iii, mid - the bit about "...if a Story... Flaw will not enhance stories, a character should not be allowed to take it..."
It's not the SG's job to weave the different desires, it's the SG's option to do so - and their job to know the difference between what they want to weave and what they don't.
The policy of allowing characters to overcome flaws in-game is exactly the same - some SG's will allow it (to one degree or another), and some will not, since for them it does not enhance the story (or the one they want to tell), but is a story unto itself, one the SG has no (or less) interest in telling.
Which is why it is good to be clear, at the beginning of the saga, about what story(s) is/are being told.
And also for the troupe to be clear about to what extent it is the Story Guide or the other players who are controlling the direction of the story. And issues like "is the story what the characters do", or "is the story something that happens to the characters".
Which is the heart of the whole issue about what the troupe thinks that "troupe play" means. Of which there are lots of answers --- all valid. The important thing is for the troupe (i.e. both players and Story Guide) to agree on what "troupe play" means.
I would then suggest you reread the entire chapter - or at least the entire paragraph (which is the fourth, by the way) to put the sentence into the appropriate context. The sentence means that a character should not take a particular Story or Personality Flaw if it will not enhance stories. It certainly does not say that personality and story flaws should be a highly optional part of the game because they may hinder the SGs from railroading characters in the directions they want.
I think again, that you are confusing the particular flaw-removal-story, with the general policy of allowing flaws to be removed through stories. True, having a character engage in a story to remove a flaw may occasionally be hard to tie to the "big picture" that the rest of the troupe wants to weave. But the same is true of any other goal that a character has! Should you ingeneral* disallow magical item creation in the game because the time a magus will be in the lab will prevent him from participating in the stories you want to tell - or because the hunt for vis will "distract" him? Should you disallow ingeneral* characters from taking Personality Flaws because they may make it harder for you to railroad them in the direction you want?
It's the job of the troupe to find a consensus on the types of stories they want to tell. The "policy of allowing characters to overcome flaws in-game" is no more disruptive of stories than the policy of allowing them to engage in combat (hey, they may DIE in combat - how disruptive is that?), or the policy of allowing them to use divination magic, or, in fact, than the policy of allowing the characters to have their own goals. I think it's a really poor SG the one who adopts the policy "characters should not have individual goals" because he cannot work them into the story - though I agree it's perfectly ok to object to specific goals like "my character is sticking around the other characters because he wants to kill them all at the first opportunity".