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I noticed the rules don't say anything about the penants that come with each ship.
When my wife saw them, she figured they were so players could identify their ships (all mine use the solid penant, maybe yours use the light-dark-light penant).
Other than decoration to simulate the wind, I think your wife has it down. I personally use the one white stripe on a black background since everyone here wants the all black.
The penants are used to mark Islands that you have explored. The different penants are so that players don't get confused on who has explored what island.
The flags on the back of the ship flutter backwards, so the pennants should be pointed that direction too. :)
I gave up on using pennants to mark islands, since they're a pain to get back into the cards (and I don't want to just keep a baggie of random pennants). I used colored shells I got at the craft store for marking islands instead.
In the rules book in the first run printings it said when you dock at a wild island to leave your pennant or some other marker on the island to mark it. When another of your ships docks there you dont have to explore again, just load treasure as a free action. In the first run printing there was only one small stapled book with no large foldout simpler rules. The folks at WK initially said there was no difference in the rules, but there have been several omissions and changes found, this being one of them. The FAQ and Parinah's rulingh on the WK forums site back up the "still do that" philosophy we had at our venue. :)