Baleur, AI lords pic from this collection as well.
MacAttack, are you sure you installed the Warband version? Try this: in game, go to "Notes" and then look up the characters (I forget what the title of that section is). Go through each lord. There will be many of them. At some point, you'll get to a group of lords who don't have a flag. When that happens, you'll know because your game will get an error and crash. If you crash, you know you have the Standard M&B version installed. If you downloaded this yesterday at about 12 PM EST, you might have the version I screwed up on which contained two Standard M&B versions, but no Warband (the problem was corrected about a half hour later).
In any case, if you DO have the Warband version installed for sure, I can't be sure what to tell you. Try posting on YellowMosquito's thread (linked in the quote on the first post of this thread). He created the banner meshes and might be able to shed some light on this.