The way i look at it, if Law couldn't defeat Doflamingo wehn he had hte chances earlier hwen he was far better health wise, there's no way in hell he's defeating him now. That would be PIS to a ridiculous amount. Law's already half dead, I already find it odd that Law's been able to do his moves when just about all his stamina's gone and he's practically a dead man on his feet.
I'm expecting Law to get his ass handed to him shortly after the flashback is finished.
One thing you guys haven't mentioned is CoC. I'm actually expecting Luffy to use his CoC as a physical attack, similar to how Shanks was able to break apart WB's ship and Rayleigh was able to break Camie's slave collar, though I don't think the latter was confirmed to be CoC, I feel like it was strongly hinted at that. I'm expecting Luffy to use his CoC to break some of DD's strings to take away some of his moves.
In regards physical strength and all that, remember, Luffy hasn't gone fully body G2 yet for whatever reason. We still haven't seen the best Luffy has to offer in that regard, and we haven't seen any G3 from Luffy either. It's not as if Luffy's thrown everything he has at DD and has still failed. in regards to a possible G4 or other new tech, I'm not sure.
But in regards to the overall impact of the story, I'm of the mindset that if Luffy doesn't have the capability to solo DD, then he should pack the **** up and go home. There are far stronger people than DD in the NW, and if Luffy can't do this on his own, then there's no way in hell he can defeat yonko and admirals and other strong opponents we've yet to meet. I think it would be detrimental if Luffy doesn't have the capability of doing this on his own. And I'm talking about capability. It's arguable that even if Law gets immediately wrecked after the flashback, that the battle would be considered a solo victory wen Luffy wins. But that's not the point, it's whether or not had Luffy gone 1 on 1 from the beginning, if he'd be able to defeat DD. I really think Luffy has to have that capability, otherwise he'll never get to PK level. Don't forget the amount of story we have left, which is a little over 400 chapters, so he has to become PK level in a relatively short amount of time, especially since major arcs tend to be 50 or so chapters long.
I'm anxious to get the flashback over with so we can go back to real time.