Touchy subject but I'll weigh in.  I think the "line" is restricting visibility.  Therefore downraking false theories is censorship, but not illegal if not done by the government.  But flagging posts or labelling them with additional information is not censorship, it is literally "more speech".  When done by a platform, it is the platform speaking, which they have a right to do.

I prefer a nostr system where we all flag each other, and we each get to choose whose flags we listen to or care about or display. 

 The difference between Nostr and other platforms is the control over the bubble you have. You can decide to leave the decision on relays (maybe not fully now, but those times will come) or you can build your bubble yourself... But in general you are not breaking someone else's printing press you are just choosing not to read their pamphlets. This has actually much more to do with the freedom of speech rather than with censorship.