Based on what we know at the moment, flagging & corruption system seems to be pretty decent. It is an enhanced version of Lineage 2 system with several reasonable adjustments made to significantly mitigate the risk of griefing. However, there is one more potential issue that needs to be addressed.
Currently, it is to possible to see the health bar of a player even if he is not a member of your group or raid, which can inadvertently aid griefers and turn healthy competition for bosses or locations into... ratting competition. For instance, a griefer could intentionally keep a player's HP low, while having little to no risk of killing that player. This tactic becomes particularly effective during moments when a party is engaged with a group of mobs; the griefer can focus on the tank or healer. This can still be achieved, even if only you can only see the segments on a health bar, especially with some practice.
If, however, players' health bars were only visible to their own party or raid members, this issue could be mitigated. This change would also open strategic possibilities like deliberately maintaining low HP to bait enemies. Upon being attacked and accidentally killed, a player could retaliate against their attacker who turns red without facing any penalties, potentially leading to the agressor dropping their gear upon defeat. In this scenario, both parties face a balanced mix of risk and reward, significantly reducing the likelihood of griefing.
In my opinion, this is the final adjustment needed to perfect the existing flagging and corruption system, making it truly balanced.
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UPDATE
Corrupted/Combatant player HP is visible, nonCombatant player HP isn't.
Still the best idea so far. In addition to that:
a) Make HP bars of your guild members visible
b) (Maybe) Make HP bars of players from your alliance visible