True, if the explosion occurs very close to the aircraft (historically speaking) then yes, it would cause significant damage, but the true purpose of flak was to fill the sky with razor sharp pieces of metal. In WWII, the Nazis fired massive amounts of flak at Allied bombers...
My understanding is that, well... it varied. "Flak" actually refers to a fairly broad category of guns (that is, anti-aircraft guns). HE and shrapnel rounds both had their places.
And yeah, the flak will pretty much keep flying in its original direction. Doesn't matter much, given that the probability of hitting one is going to be inversely proportional to 4*pi*r^2. Still a chance of encountering the stuff at distance, of course, but it quickly becomes unlikely. Look at it this way -- the energy expended in any flak explosion is going to be on the same order as any other Sins projectile (say, a missile). The difference is, that energy is going to be spread over the surface of a large sphere (in the case of flak-at-a-distance) as opposed to a very small one with the missile.
Don't quite know what kind of armour you would need to stop a projectile travelling at 200,000km per hour though.
As mentioned, fairly irrelevant -- we know the armor can take that and then some, given that the ships are throwing more massive, and likely faster stuff at each other
