As you discovered, Flow Reporting settings thankfully are not captured in an update set. The system property named com.snc.process_flow.reporting.level should be set to the value of BASIC so that one can view the Flow Context on a record and see the execution steps and result. All new flows, and those promoted to other instances will then take on this setting. As is written everywhere on this topic, you do not need or want to set this property to FULL in any instance, and should only change individual flows to this sparingly due to the amount of data that you'll be needlessly adding to your instances. Flows should be tested in Flow Designer / Workflow Studio, which generates the full reporting/logging. The setting can be changed per flow if you must test outside of Workflow Studio, but then there is no reason to have Full logging in non-development instances. I was happy to learn that this is the case so that I do not have to monitor when my developers change the setting then forget to change it back before promoting the update set.
You can easily see and update the reporting level on all flows via Flow Administration > Settings in the left nav, which is the sys_flow_execution_setting table. This value changes immediately when a Flow Reporting Setting is changed in Workflow Studio, and will get reset to the system property setting when a flow is promoted.
