In the "Spanish number", as the Dance Instructor (Louis Nicoletti) refers to it, Lucy is seated on a balcony, a rose in her teeth, while Ricky serenades her. He goes through a verse of "Lady of Spain", not noticing Lucy's shenanigans behind him, thinking the audience's wild response is for him, so he calls for a "paso doble", and sings the song again. Suddenly, on the last note of the song, the camera cuts to a shot of Lucy, and there is an American flag next to the doorway on the balcony set. No flag has been seen until this moment. The flag then remains through the next song and to the end of the scene. The scene itself gives no reason for an American flag to be displayed. The songs are not patriotic in any way; in fact, the balcony setting and first song are culturally Spanish, and the second song is the innocuous, "Loveliest Night of the Year" (When You Are in Love). The show was broadcast during the McCarthy/House Un-American Activities Committee hearings, just after the tense days when Lucy herself was investigated for possible Communist ties, then cleared to everyone's satisfaction (and relief); however, the show reportedly was filmed the previous Spring, before the investigation involving Lucy, making that unlikely as a reason for the magical American flag appearance.
In the photo of Lucy holding the baby, L B is stenciled on the dress.