I think there's some threshold of flags to upvotes and possibly some other metrics that determines whether a story vanishes, but flags can absolutely tip the scales.
It's vital to HN that user flags and/or software like the flamewar detector clear most such submissions off the front page. They tend to attract a lot of upvotes because that's what sensational (and especially indignant-sensational) stories do. Without countervailing mechanisms, HN would be completely taken over by those stories.