Why was the mod flag marked helpful, but the answer not deleted?
The most likely answer to that is because it was "helpful". The single comment proposing deletion for that answer was by a mod. The mods likely appreciated the notice, but they couldn't do much about it, since the community had pretty clearly voted in favor of not deleting it. See the comments on the answer.
@AlexA. I disagree. This is a valid, if simplistic solution. I doubt there would be any call to remove it if it wasn't so highly upvoted or if it were only one of a couple answers. – Calvin's Hobbies Jan 27 '16
[...] it doesn’t invalidate the approach and it’s most certainly not a joke answer. [...] Konrad Rudolph
Personally I think this is a fine answer, well within the spirit of the question. – Nathaniel Jan 28 '16
There is only one comment in favor of deletion on the post, and it has very few comment upvotes compared to the rest (11 vs 38/15/25).
Site policy is based on the community consensus.
If the community decides something is allowed, then it's allowed. That's the way Stack Exchange works. The majority vote in this case is that the answer doesn't fall under the ruling of "non-serious answer". Here is a breakdown of the "serious answer" rules.
Breakdown of points in the linked meta
A serious contender is a submission which makes a serious effort towards optimizing the submission's score within the chosen language(s) and other choices (such as algorithm choice or optional restrictions/bonuses taken).
Does it fit this? It's debatable. It does use an algorithm that makes an attempt to solve the challenge. It's definitely inefficient, but such is life. That algorithm was not very well suited to the challenge. Just because it's a bad choice of algorithm, and it was known to be such, doesn't necessarily mean it's not allowed. IMHO, that's like banning Java from a challenge, simply because it has no chance of winning.
In code challenges, deliberately crafting a solution that gets a poor score.
I don't think it was deliberately crafted to have a poor score, but OP definitely knew it wasn't going to win. But again, IMHO, just because that algorithm is horrible doesn't mean it's not allowed. See the "banning Java" argument in the last paragraph.
In short, if the only way a submission could win a challenge (either overall or within its set of choices for language(s), algorithm(s), and/or other relevant categories for the challenge) is if no other solutions were posted, it's almost certainly not a serious contender (like the linked submission above).
This says right there:
win a challenge, within its set of choices for [...] algorithm(s)
For the algorithm of "best answer that finds the average color", this answer definitely made an attempt. The OP even edited when another user commented with a tipoff that a different color was a tiny bit better.
Note that this does not exclude using a more-verbose language or lengthier approach in code golf, since submissions in all programming languages are welcome, and different submissions in the same language are acceptable so long as the differences are non-trivial.
I see no reason why code-golf should be special here. If our current site policy is to allow duplicate answers (short of plagiarism of course), including ones in the same language with different lengths, by those rules a less efficient algorithm should be allowed.
TL;DR: The community disagrees with your assessment that the answer is "not a serious contender". The moderator presumably saw your flag, and presumably appreciated the notice, but declined to do anything about it.