I took a look at the enemy and formation battle flags and it seems like only five of the bits have any significance in either of them.
For enemy flags, It does load the entire thing as a DWord, but then that gets AND'd by 1F and stored at 0x9AB0DC + ( enemy_formation_number + 4 ) * 68h + 4. I don't know the significance of that address or the structure it's in.
Formation flags are handled differently. It seems like only 10h, 8, 4, and 2. The standard formation flag set is FFEDh.
In the brief look I gave it, if flag 0010 is set then the battle will force a pre-emptive battle if the battle type is 0. Seems a bit strange to me that that isn't just set in the battle type byte, but whatever.