I can see your point but at the time being it's the best I can think of and myself and my housemate would be happy enough to use s.40 in such a case and let the court decide. I certainly don't think you could be criticised for reporting someone under s.40 for exhaust flames.
I don't believe there is a specific piece of legislation relating to such flames, however there is a specific offence for smoke (which I remember as the offence code is my shoulder number). So in this case had to use some lateral thinking.
I'm actually at the Hendon driving school today which is obviously full of ex-traffic, so if I remember I will ask then.
The short answer is if you think it's wrong it probably is, driving a car which shoots out a flame now and then can't be a good thing mate.