There must have been a lot of anti-traditionalist sentiment around, for something so integral to the nation to have been cast aside, and "improved".I hope my answer justifies a new post (since it's good to put them up regularly):
I've never studied the 1964 flag debate in any detail, but of course a new flag was, on the whole, something favoured more by the Liberal than the Conservative party. From what I know, I think the primary, most conscious motivation for a change was to create a sign of Canadian independence from the British Empire, and so by extension to placate Quebecois nationalists (did it work?)
Canadian nationalism, from Confederation to the 1960s, was a complex thing because it assumed at least three major levels of popular sovereignty: the local or provincial, the Dominion or federal, and the imperial. One's nation and culture was not simply Canadian but also and equally British, while at the local level, say in a Vancouver soccer league, one might identify with old country loyalties - e.g. as a Scottish or Welsh team, though less often as, say, a Glaswegian team (you can’t often be so particular in a new land filled with all kinds of people, especially one where Friulians are identifying as Italians for the first time, and Cantonese as Chinese) - which had the effect, I believe, of draping the local scene in the sundry symbolism of nationhood (see, for example, A.M.Stephen's poem, "Vancouver") and buttressing the provinces’ claim to be a primary spokesman of our democratic impulses.
Idealistic Canadians were always more keen than the English to promote schemes of "imperial federation" in which representatives of all the white Dominions (and maybe others, later) would have a role in ruling the empire. In a way, the flag debate marked the end of that and other imperial dreams, which is why it angered so many veterans and John Diefenbaker. But it also involved an attempt to make us identify more with Canada as defined by Ottawa, and less with Canada as defined locally while under the protection of the “broadest” (imperial) flag possible.
If you read the 1867 constitution act, it looks like the plan of the Fathers of Confederation was to build a strong federal government – the feds have, for example, the right to nix provincial legislation (a right Ottawa has since learned never to use). But once the constitution came to life in the face of certain realities, as the courts started to interpret it, it became clear that the provincial governments would become significant powers, especially as the importance of education and social welfare programs grew (and on this question of the division of powers, our comparisons to the American welfare state would have to dwell).
So Canadians who had strong attachments to the realities of everyday democracy had, by extension, an attachment to provincial sovereignty - in this they were not unlike the English who didn't want any kind of imperial federation because it would dilute English sovereignty in London.
Yet at the same time as the provinces established their importance, Canadians had utopian dreams for the empire (no system of government is benign or conflict free, so one dreams; and in a world of conflicts, it is easy enough to think that what works for us should work for other, less advanced, people...) But after two world wars, imperial dreams faded, the UN came on scene, and there was an opportunity for Ottawa to become ascendant, stealing a march on the provinces by being the agent behind the symbolic deconstruction of the old imperialism and Canadians' self-identification as equally British and Canadian. Remember the Lester B. Pearson who gave us the flag was also the Lester B. Pearson who got a Nobel peace prize for playing the UN middle man in the Suez conflict pitting Britain against Arabs (and Americans), which was obviously no longer the Britain it had been a generation or two earlier, or Pearson would have been lynched on the streets of Canada, whatever criticism he and the Liberal government did receive for their treacherous conduct.
When Pierre Trudeau came to power after the 1964 flag debate, this “Ottawa-centrism” further matured. With some reason, Trudeau saw the Quebec of his youth as being run by a Church-backed oligarchy, the Maurice Duplessis mafia, and he thought the only way the people could be freed from local tyrants was by having their rights established and protected at the centre (on the model of the national government in the US enforcing civil rights in the south). Thus began the now familiar process of building up the state in the name of protecting peoples' rights. Of course, after such a good idea gets taken too far, local institutions are criticized and eroded and people worry about doing things that will be stopped by some branch of the state in the name of protecting someone's rights. So we end up with many rights and less and less ability to govern ourselves...
In my rose-coloured view of the old Red Ensign flag, what the Union Jack in the corner represents is not so much any kind of central political sovereignty in London (though there was, at least until the 1930s, such a power over Canada in foreign affairs and matters of war), as an always unfulfilled and unfulfillable dream of some future unity among the many nations who are part of the empire or commonwealth of nations, and who, while united by shared values and traditions against any trouble coming from the less civilized world, are nonetheless moving towards and/or practicing local self rule according to the parliamentary and democratic norms, and the model of Christian nationhood, first developed in England. In other words, having a Union Jack in one's Dominion flag is like having the Queen on one's coin. She is the symbolic head of state, but she has little political power; therefore, no politician can buttress his power by claiming her symbolic role. The Queen represents all Canadians, while in real political life, no one can. Thus, to change flags was to create a new symbol, one more obviously identified with a worldly political power: Ottawa; and, some say, given the choice of colours and the party in government at the time, it was an identification with the Liberal party itself.