Isn't ther a guideline that you can't take more than 2 flaws? How'd these guys get around that - houserule?

Pushover GM.
You should have noticed by now...

Not a pushover. They just all like playing as powerful characters as possible, and there is nothing wrong with that. Sure, his player field broken PCs against him, but he is just as bad at doing it to them. Buggy, for instance, was not just OP, he was table-flipping-and-punching-the-DM-out cheap.
I expect Arlong to be more of the same, when he shows up.
God, I hated Arlong. I can't wait to see him get destroyed by these guys.

Wait until they get to dudes like Crocodile and Magellan.

You take a flaw for the ability to take more flaws.

thats the rule in D&D 3.5, and while a lot of rules for this Pirate Campaign system are the same that doesnt mean ALL of them are.