Flag the inappropriate content and not allowing people to add a content?
I would look into using rules again.

You are going to need a way of identifying users who should not be able to post. Set a rule to apply a flag to the users account once one of their nodes has been flagged 3 times. 

Then use this flag in another rule as an IF to only apply it to said user, then maybe either redirect the users who access node/add pages to a page with a custom warning message or try another form of disabling the node creation. Please see below


  Event:
  Content going to be saved / Accessing a page
  
  Conditions:
  User is flagged with "suspended user"
  
  Actions:
  Page Redirect
  Show a message on the site


EDIT: Am I correct in assuming you are wanting users to flag a node inappropriate? You should be able to use something like the rule you have already created to do so, just also flag the node author when you flag the content...