Thanks for actually remembering to post after I asked you <33
Flags like this were good luck charms of sorts, they wrote down there names on the flag to try to rally enough courage to fight the war they were so terribly losing. It's a pretty ancient tradition, and it's definitely a sentimental piece, as it shows the desperation and fear that was present in those that actually owned the flag, but it's sentimental for someone else.
For OP's grandfather it really is just a war trophy.
マホ~