Gavin, I like you so don't take this the wrong way.
The language describing the fishing methods used is permissive which means that anything not listed is not going to be legal (for instance trot-lining). You were right on point there. Your interpretation of "Flies only" is creative and reasonable. However, that phrase may also be interpreted as referring to the variety of flies that may be used or to refer to the number of fishermen expected to be fishing at any given hour allowed. I agree that the use of "single fly only" clears the matter up, but the regulation does not currently say that. It would also be much more clear if the legislative intent was to permit the use of droppers to add a provision for that which would read something along the lines of, "any number of flies may be attached to the terminal end of the line so long as each individual fly is attached such that the distance between any two flies is not less than six inches." But now we would have the issue of wind knots causing a tangled mess and creating a potential (albeit faint) for criminal liability.