I would think unless something is blatantly wrong that the layperson sitting at Craigslist can see, I don't think it does. Now if there is wording in the ad that's easier to judge.
I agree and I'm not sure it does much good at all, in all actuality. True breeders just repost and aren't really deterred by being flagged; if they are, they just find another site to sell their animals like Ebay Classifieds or Hoobly. Short of making those doing the flagging feel good about it, I don't see that it serves a real purpose at all. In a lot of cases it seems people are more or less flagging ads they don't like, which like I said, can be a disservice to the pets being rehomed and little more than an annoyance to the folks being flagged.
I know there's no shortage of "flagging wars" that go on on CL just about everywhere, but it doesn't seem to serve any actual benefit, to me, other than to provide one group a sense of superiority for being the flaggers/CL "police" ... And to me, that doesn't seem to be overly valuable. JMO.
You could say that breeders are being discouraged or possibly prevented from free advertisement, but like I said, there's no shortage of other places out there that don't have written rules against it, so it isn't really a jump to assume they'd either just keep posting or move on to an easier place to post. I certainly know it's irritating to see ads by the same person over and over again, but having their ads removed isn't going to be a big hassle or burden in the scheme of things.
