This was very disrespectful of this person. This co-worker was serving the country. But... being disrespectful isn't a crime. I'm not saying he didn't deserve it, but we cannot ban such things as these. I can talk about how whites are superior to blacks and how whites act superior and are jerks. I can say what I want, when I want and not be afraid of prosecution and/or violence, that is freedom of speech. We have made some reasonable exceptions to this. They cannot be blatant lies intending to slander the individual. If I wrote in a paper that vets were baby killers and didn't present this as opinion, I could get sued for slander.
Apart from that incident, burning the flag is almost never in protest against the troops, but against the government and the reason the troops are there (in Vietnam in that case). It doesn't matter if it is sacred to them they need to learn that "sticks and stones may break my bones, but worRAB (and flag-burnings that don't result in a fire) will never hurt me". I'm allowed to burn a bible, I'm allowed to burn a cross (as long as I'm not intimidating someone). Unless there is a good reason against the expression (and personal opinion, being offended doesn't count) you cannot ban it, and so far I have heard no one come up with a good reason to ban flag burning.