Wow I almost thought I was reading my own post from another forum a few months ago. At that time I didn't find anything. The $79 solution from Kenwood didn't seem like a good option to me, I even sent Kenwood a bit of a nasty e-mail telling them how idiotic it was to put the FLAC capability only in their cheapest deck... a deck targeting a market that wouldn't even know what the capability is.
Anyway JVC is your solution. Interesting JVC and Kenwood are the same company, maybe JVC is meant to be the higher end line. This is a GPS Navigation deck... http://www.crutchfield.com/p_105KWNT310/JVC-KW-NT310.html?tp=20212
that plays FLAC. I have not looked through their other decks but my guess is they have standard decks that do it. I ended up with a Kenwood that plays WAV in my truck before discovering the JVC but put the JVC-KW-NT310 in my Civic. Will probably later put the JVC in the truck.