1.) This is a Homeowner's association and not any sort of government. Sadly, shit like this is what you have to deal with when you live in places that have HOA's.

2.) They're not telling him he can't display the flag, they're telling him that he can't display the flag on a giant metal pole on his property.

3.) He erected the flagpole AFTER the HOA's decision. I think the page you linked to has been updated since you posted it, because it now says this:

Quote Originally Posted by article
Tonight, the Sussex Square Homeowners Association issued a statement reiterating its position that Barfoot directly violated the association board's denial of his request to erect a flagpole.

"This is not about the American flag. This about a flagpole," the statement reads.

Barfoot lives in the Sussex Square community in far western Henrico; its board of directors rejected a plea from Barfoot in July to approve the pole, disallowing the fixture on aesthetic grounds
So he put up the pole AFTER his request was denied. I agree with you guys that the HOA doesn't have the moral authority to tell the Col. that he can't display the flag any way he damn well pleases, but the issue at hand is property values, which would plummet if everyone in the neighborhood had a 90 foot metal pole in their front yard. The article says that many houses in the neighborhood display smaller flags affixed to their porches, so to say that Col. Barfoot "can't fly a flag" is an untruth.

4.) He's having his day in court. If he doesn't win, he can rally his neighbors to remove the HOA. Or he can relocate to a non HOA neighborhood where he can fly his flag all year and leave his X-mas lights up all year too if he wants.