Hmmm...
The only functions you can use with "flag" is;

VISIBLE;
OVERLAY;
TRANSLUCENT;
FILTER;
LIGHT;

(It stays like that in the handbook)

but try it with "var ISOMETRIC;" also;

action free_camera()
{

VECTOR camera_force;
var ISOMETRIC;// Give it to a var
set(my,INVISIBLE|POLYGON);
camera.flags |= ISOMETRIC;// Now no errors should show up

camera_force.z = 0;
vec_set(camera.x,my.x);
vec_set(camera.pan,my.pan);

while(1)
{
camera_force.x = (key_w - key_s)*10*time_step;
camera_force.y = (key_a - key_d)*10*time_step;
vec_add(my.pan,vector(mouse_force.x*(-7)*time_step,mouse_force.y*7*time_step,0));

c_move(my,camera_force,nullvector,GLIDE+IGNORE_PASSABLE+IGNORE_PASSENTS+IGNORE_PUSH);
vec_set(camera.x,vector(my.x,my.y,my.z+15));
vec_set(camera.pan,my.pan);

wait(1);
}
}

Not tested.
Hope it helped