bezobrazov,
You're right about
Shenandoah and her colors; I think that, as you pointed out, the proper vs improper usage of 'war flag' and the 'Stars and Bars' nickname caused a great deal of the misunderstanding here. This is a photograph (fortuitous!) of the lady in Melbourne, and she is indeed flying the Stainless Banner as her national flag.
Her naval jack was, though, of the same pattern as the Army of Tennessee's battle flag, and that was the issue I was addressing due to the misunderstanding. Apologies!!!
The only reason I posted the last example is that several units did indeed either receive sewn examples of the 3rd National Flag, or modify their 2nd National flags to conform to its description. The reference to the Klan is inaccurate, as the Klansmen were historically as likely to carry American flags as any other (especially from the post Span-Am war period till the 50's)... the trend of carrying Naval Jacks and calling them 'battle flags' is a more recent thing, owing largely to the Jim Crow era.