This is an antiquated offence that like sedition and blasphemy should be consigned to the dumpster of history. The flag is just a piece of cloth. An important piece of cloth in some people's minds, but a piece of cloth nonetheless.
Without this law it's not like you will see flags used nefariously. Acts such as burning flags may actionable under other laws (setting fires recklessly for example) just like setting fire to other pieces of cloth in a reckless manner.
There should be nothing inherently special about the New Zealand flag that potentially results in people could facing summary conviction for "us(ing), display(ing), destroy(ing), or damag(ing) the New Zealand Flag in any manner with the intention of dishonouring it". How ridiculous. The notion that you can dishonour a piece of cloth.
It's all so subjective. We all know what is actually meant: You can't be a radical and use the flag in protest. But it's OK to drape the flag over coffins in some mawkish display of faux sentimentality or for neo-Nazis to fly the flag at their rallies while spewing their nonsense.
Hardly any one ever faces charges under this provision. Removing it does not create a potential enforcement problem. It is, however, an important symbolic act that we, as a nation, are comfortable enough and mature enough to realise that our identity and strength as a nation cannot be weakened or diminished by tampering with a piece of cloth.