I believe the SKY_PRIORITY_FLAG field affects whether to display the red SkyPriority badge on the reservation when you view it on delta.com or the Delta app. Note that SkyPriority is only available to SkyTeam Elite Plus members and VS Silver is SkyTeam Elite, so I would not necessarily expect this flag to be true.
I will note that VS only recently joined SkyTeam, and before that Delta was not amazingly consistent at providing certain benefits to first-tier elites across its non-SkyTeam partners (e.g. LATAM, Virgin Atlantic, Westjet, and formerly Virgin Australia). It's possible that VS Silver did not get free preferred seats under the previous agreement and Delta has not updated the code on delta.com yet. I do not have a hard data point on this though.
That's a good point - the JV agreement didn't include free preferred seat access for VS Silver as I've flown loads of times as VS Silver - only included priority check-in, priority bag drop, baggage delivery boarding and one free bag on top of the standard baggage allowance (if none, then you just get one free bag) so this is a new additional and maybe a technical glitch?