Ok, since this was probably THE hardest part of the balsa building portion I'm going to go over this step-by-step. This will be over multiple posts for clarity but you will find it quite logical, but it is a procedure.
We start by deviating away from the instructions here. I extend the marks on the bottom of the wing that are references for the hinge locations. Because the hole for the hinge is drilled at an angle, by the time you remove the 3/16" of wood for the flap recess, you end up with a hole being lower that you want. It will be clearer on the next steps.
So use a razor blade to remove the section but NOT all the way to the top of the wing skin. Leave about another 3/16" and round that with a dremel sanding drum. So, can you now see why I did not drill yet? If you drill into the edge at an agle the hole to accept the hinge woult be in the wrong location by about 1/16".
Take you inner flap and drill holes for the hinge, making a recess for the knuckle so that the hinge point is offset.
You will need to further shape the top and bottom of the inner edges for a better fit for the recess you just made.
Check your side profile often to look for inconsistent sanding.
Dry fit your flap and further shape the recess and flap as needed.
Check your top profile to make sure you have proper alignment with the wing root.
Check your deflection and sand the root of the flap and/or the wing root to make sure the flap does not bind when deflected.