You can breed these in a relatively small tank. I would say a minimum of 5 gallons but a ten would work better. Fill the tank completely with java moss. Again, until you can barely see the fish. DO NOT clean the algae in this tank. Flagfish thrive on filamentous algae. Pull it out of your other tanks and feed it to these guys. Be sure to include a large portion of vegetable or algae based foods. These will either spawn in the java moss or on a spawning mop in normal mop-spawning killie fashion.
There is another way to sex them, but I am having a problem remembering it exactly right now. Females either have a spot in the dorsal or on the side that the ADULT male is missing.
As for the eggs, I would remove them. The adults will eat the fry. You can pick the eggs as you see them and rear them in a hatching container or tank.