I would like to suggest something simpler.
Unfortunately we can't post images so I can't show the pictures I have, but teh design is this:
We still have a bavarian or at least germanic sim, so I propose we keep the blue and white. We use an accepted variant of the bavarian flag which is simply a field divided either horizontally or vertically into two stripes of blue and white. We could also use the bavarian diamond lozenges, but I feel the stripes are cleaner looking.
Ulrika and Kendra have the chicken, (hopefully it is a female chicken as the rooster has some baad juju heraldically speaking. ), so we stick with the bird theme and use a [i:2vj1ae0l]white heraldic owl[/i:2vj1ae0l] figure as our defining motif (symbolising sagacity), on a [i:2vj1ae0l]shield of black[/i:2vj1ae0l] for strength. This would float in the middle of the flag sort of like the way the bavarian coat of arms floats on some of the flags Kendra used.
If we like, we can go further and pick helmets, badges and other heraldic elements to make up a proper coat of arms in keeping with heraldic tradition. Since we are a medieval city, this would be the most appropriate approach to our flag I think. If we need some kind of graphic logo for the "overarching" entity, then that is something different again.
If anyone is interested in this idea at all, I can make up some flags in a jiffy and hang them in the platz for a critique.