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This will be in a general sense since flawes are unique to each person and there is rarely just one flaw. Some examples are people who are scared, want money, want fame, want revenge, or want control. There are more flaws, but since most movies use these flaws, these will be the ones that you will know the best. You will notice that I did not discuse any motivations for these flaws. Motivations are simply convenient excuses. Often these excuses were run by a large group of people over a long period of time until something developed which allowed no argument. The excuse can also be a test to see if you agree with the motivation and therefore may support the methods used to accomplish a goal or support the flaw. And now onto the kung fu.
A flawed student is difficult to spot since they are usually highly motivated. They train hard, want to move in a train every day, and seem to be pit which can be filled with information. The flaws show themselves when the student interacts with other students. For example, a student motivated by revenge will consistantly create resentment in a school. They will lie, cheat, and steal in order to "get someone back". Drills, competitions, even the amount of knowledge learned by others will be seen as some sort of black mark upon honor which will require an action to even the perception of a situation. Great qualities in an assassin, not so great in an instructor. The flaw, whatever it may be, will color the techniques developed by the student. Does the student train all techniques from an ambushed posture, against multiple opponents, or even against a specific person? This is difficult to spot since all of these things need to be addressed and it may take years to reveal the developing psychosis.
The flaw won't be revealed against lower level students since they are easily beaten. The student isn't pushed far enough, emotionally, for the flaw to show itself. Any cruelty or outright dishonesty (i.e. Evil) will show itself but not the actual flaw. Techniques done against higher level students won't show the flaw either since the student will react out of fear or be in learning mode. It is possible to have a flawed student excel for years before the flaw becomes a problem. The flaw will show itself when the student is interacting with his/her peers. These are the people who can push the student far enough to the edge for long enough for the flaw to show itself. Even then the flawed student could have true skill and become a master of his/her art. Often these are the first and most likely people to master an art. The problem comes when the student becomes a teacher and begins to pass on the art.
The teaching is when the flaw truly shows itself. Flaws tend to have smaller flaws which hide them. The biggest problem is that the master immediatly removes any training which doesn't support his/her flaw, provides one "most important" solution, or exposes the flaw. Many a style is a shadow of its former glory because a teacher took out what took to long, was difficult, or wasn't popular. The amount of information that was lost because someone never used it and therefore never taught it. What if you are tall? Most foot work will be a waste since shifting will get you where you want to be. What if you are strong? Most technique will be considered useless. What if you are afraid to hurt people? Most of the effectivness will be removed so you don't hurt anybody.
This is the problem with flaws; everything must support it or the unit falls apart. In movies, nearly every hero starts out flawed. Usually a family member has to die for the hero to recognize the flaw. The rest of the movie involves removing the flaw, and therefore any limitations of skil, so that the hero can win. Often the bad guy also has a flaw which causes the all the problems. He is not "Evil", he is "misunderstood". This doesn't make him any less dangerous and may allow him to cause even more damage than an evil Master might. An Evil Master will often use a flawed master as a partner or front man. The flawed master is also usually right about most things, but also limited and destructive to anybody who conflicts with him. The flawed master is usually a firm believer in the adage " to make an omelete, you have to break some eggs".
You are near a flawed master's school if you notice that every student has the same flaw.
A flawed school will often explain away gaps as unimportant or a waste of time.
Many situations will be unresolved as something that rarely happens so don't worry about it.
Flawed masters tend not to teach meditations.
If every student has the same personality then the school may be flawed and even have the same flaw.
If the teacher only teaches peaple above a certain level then there may be gaps in the information.
If all the students have the same body type then there may be a major flaw.
If the entire school is focused on one objective then their may be a flaw at work.
An example of this is a terrorist organization. Alot of people who solve problems in a self destructive way and focus their training for a very limited situation. Do you think with all their training they could stop a mugger? After a rape they kill the vicim. They attack the week and carry a bomb in case it doesn't go well. Not a very good reputation for a religious/martial organization to have. Where is the healing, longevity, or effecient resolution of problems? Many of the things they say are correct if you don't dig to deep, and those who dig to deep don't get to go to the training camps. Serious flaws at work.
Most cults are a result of flawed masters.
Any real school will have a social system set up that attempts to minimize flaws or focus them into positions that cause people to admit the flaw. "Yes I fear that I am weak and will be attacked by random attackers who do so only to hurt me" Maybe this guy should be working security? " I need money to solve all my problems ". That guy should work on marketing, not which skills are most important and what order they are taught in.
There should be flawed masters in a school, not running the school.