What is Apple's serial number flagging procedure?
Regarding the flagged serial number, I had this done for a client but nothing ever came of it, so either it wasn't ever activated or there is no official procedure for our country. 

On a side note regarding tracking down a physical address. If your iPad is set to check email accounts such as google or your own hosted mail. As soon as it's online it'll put the originating IP in the logs which is something the police might be able to get a warrant for. Google actually lists all current active connections and 'recent activity' from IP and how long ago. It's listed in the bottom right corner (details). This could be useful in tracking down an address.