Technically no matter what software you have, there is still only 16 flags physically in the CM15A. I don't have anything to do with iHouse but I would bet their flags work more like Noam's environment variables suggestion than AHP's flags, and need the computer connected to the controller to function.
The binary count works if you need to track state instead of a series of flags. you could use 4 flags to set up 2 binary values with 4 states each (00, 01, 10, 11). You have to fully verify the state of each flag used as a bit when you check, and you can't reuse the same flags/bits across multiple states, but otherwise the idea is sound. Not everyone's conditions can benefit from this type of compression but I'm sure at least a few can. The tricky part is recognizing when you are really saving bits, and when you are just lumping conditions.
