We dragged out flag out there with us and it basically floated right up in the middle of the boats. None of the boaters moved away from the flag as legally required, but we didn't expect they would have anyway. But there was an incident. My dive buddy was managing the rope and the flag during our dive, and there were several occasions where we noticed the fishermen pick up our dive buoy and attempt to toss it further away from they're boat!
# 1 :no There is NO law in Canada that requires a boat to remain any distance from a dive flag. If you were taught that somewhere, better have a discussion with them. The Safe Boating Guide from Transport Canada, "recommends" staying 100 feet away from a divers flag. The only law is for a boat flying an Alpha flag, that you must avoid them.
# 2

If the boats were out there fishing first, why would you think they would leave? Do you often stop whatever you are doing, if someone who arrived later indicates you're in their way? (I don't)
#3 If I was fishing from my boat and a float/flag tangled my line or rubbed up against my boat, then I'd probably move it, pull it, whatever to get it out of my way. Especially if I didn't recognize the meaning of a dive flag.
#4 If someone pulls on your flag, let some line go. If that doesn't do it, or not fast enough, LET IT GO. Then you can attempt to recover or not. And NEVER, EVER tie your flag onto your person. What if a fast moving boat didn't see it and snagged? If you don't boat, you have no idea how hard it can be to see a flag/float when you're moving. I've lost a flag, it wasn't worth sustaining an injury (it wasn't taken, it was an equipment failure, but I still made a conscious choice for safety over trying to recover it).
I dive that site now and then. I do not drag a flag, I sometimes set one near the shore where I will be ascending. I treat it as a virtual overhead, meaning I descend very near shore, swim to the wreck, swim back to shore and ascend very carefully in water shallow enough that boats are unlikely.
Lastly, we really don't want more rules/laws. Governments usually look at two things when they make new rules/laws. What's the easiest way? And what has the most economic benefit or the least loss. Look and see how many places there are around Barrie that deal with fishermen and pay local taxes. The folks that sell boats, repair boats, sell bait, tackle, etc. Now how many places are involved with diving and how much do they contribute. Push comes to shove, if we can't get along and share the wreck, the easiest fix will be banning scuba diving and it'll have the least negative economic impact on the community (I don't belittle the impact it'll have on the local dive shops).
I strongly support a no anchoring area around and on the wreck, otherwise the destruction will continue and soon there'll be no wreck. And that will harm both fishermen and divers. But, if you think you'll get boats/fishing banned from the wreck and surrounds, it'll never happen. And some signage to educate boaters on what a dive flag means. And perhaps some enforcement of the laws that prohibit damaging wrecks by divers and BOATERS.