There are some very nice flag display cases out there -- check with your local flag shop. There's one that's triangular, for the properly folded flag, and will sit on a shelf or desktop or wherever without taking up the whole room. They don't cost too horrible much, either.
I don't think it's appropriate to fly a flag that has draped a soldier's or veteran's coffin, as the sentiment is that he fought to preserve it, and this one is his own -- and should therefore be preserved in his memory.
But that may be just me...