Your question led me to re-read an article on Swiss infantry in 'Medieval Warfare' by Robert Holmes (actually concerning the Burgundian Wars, so if 'medieval' at all, very late 'medieval'). Holmes suggests that all units from a particular canton (those units known collectively as a 'banner') fought under that canton's flag, but that each 'banner' consisted of any number of 'fahnlein' - sub-units of 50-150 men - carrying their own ensign as well. If you modelled a body of 3,000 troops from Geneva, say, underneath the eagle/key motif on a yellow/red field, you might accurately also have 15 or so other flags in a unit of 30 or so miniatures. Surely madness.
In ECW gaming we have the same problem: a regiment of 1,000 men had ten flags. A long-established convention is that two is the norm per regiment; occasionally you see 3 or 4 in brigade-level games, but I have never seen more. You might consider adopting a similar convention: one flag per 500 or 1,000 or 1,500, depending on the figure-scale of your project.
You have picqued my interest. I would love to hear how you get on. You clearly want to 'get it right' historically and visually (that dreadful balance!). I have always gone with what looks right rather than strict accuracy, if I can justify it to myself.