I think a community flagging process is good so long as there are guidelines that are set in place. That way we don't get outliers flagging things that aren't inappropriate for invalid reasons. Also, to combine the two paths, having an official review process to see the flagged content would bring it all together. If people are uncomfortable with anything, they can quickly set the filters to filter out a large part of the cards they don't want to see. I think a tag system would be great for this.
I think that limiting the creativity from the outset will defeat the purpose of this game in some part, mainly because from the start using custom art has been mentioned as something integral. Personally, it's part of what drew me to the game.
I wouldn't suggest reviewing every single card that is customized simply because that is insane. So having the community flag cards considered inappropriate by guidelines you set will make the process easier. I also recommend issuing bans to repeat offenders whether they are purposely making inappropriate cards or spamming by flagging any card/ not following flagging guidelines.
I know that sounds like a lot and I don't know how many resources you guys have, but I think that there can be a balance struck. Oh and also keep in mind plagiarism. I don't know how much can be added to the blockchain but people claiming work as their own that isn't, is also important to catch. Maybe a way to add that at least they have permission to use the art or somehow letting them link to the original if it's online? I think having an info box about the card that authors can write in would be a good start but I don't have a good idea right now.
Whew, sorry for the long reply, but I want to see this succeed so I'm offering as much as I know. After seeing other sites going through so many debacles where simple solutions could have solved the issues, I don't want to see that happen here.