What PROBABLY happened at PD...
"OK intern Dave since it's your first day here, you're on prop duty. Make us stuff for our level designers to place around the track to make it look believable, populated, high quality, etc"
"Sure thing Yamauchi-san"
"Oh, and Dave, make sure to use as little memory as possible, we ain't got much"
"OK boss"
And then Intern Dave spent his first week at PD making a bunch of sheep, shrubs, flags, tents, Alpine Rocks, etc for placement around tracks like Toscana and Eiger Norwand and the Nurburgring.
Here are some facts:
A sheep mesh that doesn't animate and has a tiling wool texture and an alright head texture takes about 0.001 seconds to render. Literally not that much, obviously, but deleting the sheep (even a herd!) won't do squat to the framerate or help fix any screen tearing.
A 2D flag is one sprite sheet, maybe 9 images adding up to a 128, at the most.
A 3D flag is one, much smaller texture, with MAYBE 8 or 9 tris (polygons). Animation is tiny, mesh is near free to render (under the threshold for the system), texture is tiny.
Point is, if something is a problem, the sheep and/or flags aren't contributing, nor will removing them help at all. They're a quick, easy and cheap way to make the game look better - stop being babies and enjoy the view!