It does indeed, just flagged it on my Mac, allowed the device to sync and the small flag icon appeared :)
Originally Posted by wp7novice
There is one small issue, the reply (and forward) indicators only appear to be synchronised on the Mac/PC all the time, whereas on the device it only records replying and forwarding on it itself. So if you reply to an email on your Mac/PC, it wont show on your phone, however if you reply or forward on your phone it shows on both. Will be good to have that looked into by Microsoft.