The answer is no. Don't fly it from your starboard spreader. That is for burgees and courtesy flags.
There don't appear to be any specific rules for battle flags. The PSSA one is essentially a house flag, a rectangular flag denoting membership of some organisation. Although house flags are traditionally of similar size to burgees, there is no rule to say they can't be larger. They are traditionally flown from the port spreader.
A new tradition of a shaped battle flag (shaped so that it will fly straight when flown from the forestay) is becoming common.
The only proviso is that, as with personal message flags, it should not conflict with any other maritime message.
But you are right that one has to be careful .. there is a difference between tradition and the law.
As an example, there is no law that states that you have to remove your ensign at night. That is an old naval tradition that was of a sensible practical nature. You don't wear out a cotton or wool flag if it can't be seen! With modern materials this is is less important. It is amazing how we stick to tradition for no sensible reason.
On the other hand if you fly a Union Flag in place of your Ensign you could be heavily fined. If I were to fly my 'special' club ensign without a burgee, without documents aboard, or having forgotten to renew my SSR, I could be fined thousands of pounds.(Shipping Act).
I would be interested to know too if anyone has any more recent info on this issue.
Chris. Elsa SS 26 (103)