No this is not a bug.
I wrote "Custom URL for flag-images" so it should be a directory ... you noticed already that the plugin changes your URL "http://mydomain/wp-content/plugins/multisite-language-switcher/flags/gb.png/us.png".
You can - of course - create your own directory (in your theme-directory for example) and rename there the gb-flag to us.png. This is a "quick and dirty" solution if you prefer the Union Jack as flag for the English language.
Regarding the link ... I don't know what you mean. The generated link is always the same:
<a href="http://lloc.de" title="Deutsch"><img src="http://lloc.de/it/wp-content/plugins/multisite-language-switcher/flags/de.png" alt="de_DE"/> Deutsch</a>
It depends how you configured the plugin but there is no target defined if you mend something like that. There is a way to change this behavior but you'll have to write your own code for this.