The old flagging dialog box politely "stepped aside" or wasn't so big that it prevented a quick re-scan of a post and possibly a copy/paste of things in the post you wanted to highlight to the mods.
The improved flagging dialog hides the post being flagged. Now, with all these new flagging options, it's sometimes necessary to have a quick re-read to make sure you're picking the flag reason that matches best. If you've started typing in the "other" box, then you have to select/copy, close the dialog, re-read, re-open, etc, etc.
It kinda gets in the way.
It would be nice if the box
were moved down a bit, to directly under the last line of text in a post (provided there was space available, perhaps); or
were draggable so users could move it out of the way
This is also a problem with similar dialogs such as the closure dialog. It's particularly problematic with the Close as Duplicate Dialog as it's quite possible you'll want to review the question or click links to suggested duplicates in the comments, which might be blocked by the big overlay.