Well I know plenty of people in the US that would throw used toilet paper in a trash can believing that it will clog the toilet. I personally always flush it down and never had any issues, even in less developed countries. I could see why some places may have taped up the don't flush your toilet paper sign, but you have the option to ignore it.
As for the simplicity of the Olympic Village rooms, they are temporary housing used for couple of weeks, not luxury hotels. Whether London 2012 or Beijing 2008, they are all very basic.