Making a flagbearer only works if there's a flagbearer already present in play.  They're still flagbearers, but they don't get the ability.  However, if the opponent has a flagbearer, and you just need to terror or snuff something, change your intended target into a flagbearer.
If you want proof, check out the official wizards site: , where I shall post for those lazy bums that won't look for themselves.

Unnatural Selection  
While this will rarely be a card you'll want to play (If you have 4-5 Coastal Drakes, who knows?) there are some neat tricks to be done with this card. Flagbearers aren't too strong when it hits play, as you can make anything a Flagbearer (no, it doesn't acquire the Flagbearer ability, but it means you can target any creature with your spell), and if your opponent has many duplicates, making their creature a Legend can be pretty cool. An interesting utility card for your sideboard. A 11th - 13th pick

Not that Unnatural Selection isn't a useful card, but it's not THAT powerful.