Here's the solution I received from the author - I've implemented it on my blog and it works fine:
The order of the flags depends on the order of the items inside the arrays on header.php.
Suppose you're using Google Translation Engine and your blog language is english. If you want to change the flags order you have to modify the order of the items inside the array on line 209 of header.php:
'en' => array( 'en' => 'English',
'it' => 'Italian',
'ko' => 'Korean',
'zh-CN' => 'Chinese (Simplified)',
'pt' => 'Portuguese',
'de' => 'German',
'fr' => 'French',
'es' => 'Spanish',
'ja' => 'Japanese',
'ar' => 'Arabic',
'ru' => 'Russian',
'el' => 'Greek',
'nl' => 'Dutch',
'bg' =>'Bulgarian',
'cs' =>'Czech',
'hr' =>'Croat',
'da' =>'Danish',
'fi' =>'Finnish',
'hi' =>'Hindi',
'pl' =>'Polish',
'ro' =>'Rumanian',
'sv' =>'Swedish',
'el' =>'Greek',
'no' =>'Norwegian'
),