Lous1985, your technique of decaling over flat paint is a new one for me. Like you said, gloss is not so much to hide the film, but to give the film a smooth paint texture to adhere to, which eliminates silvering. That's also been my experience.
The thickness of the decal film makes all the difference in the world as to how well the decal itself will "disappear." Some of the older decals like Champ for example, are literally impossible to completely have the decal edges just disappear. In my experience, Microscale decals are the best for this end result as the film they print on is very thin. So much so, that I've read some complaints about it here on the forum. You absolutely do have to be extremely careful with the Microscale decals, but the end result is the best.
As shown by my repaint "027 is still fun" thread linked below, I do a lot of repainting of the smaller types of 0 gauge cars and locos. I can get away with mixing scales of decals a bit, utilizing HO or N decals from larger types of prototypes. And I'm not so much a purist, that I won't take liberties if need be to complete a repaint project.
I've also used the K4 decals which are really nice due to the variety available, and that you can choose your scale. And the decals are laid out on the sheet so you don't have to piecemeal things together. For example, the car data is printed on the sheet directly below the car number. Although by decaling individual lines of type, it's easier to hide the decal lines by trimming the decals close: I cut mine out of the sheet using a straight edge and a razor blade instead of scissors.
BUT the film stock used by K4 is a little bit thicker and thus more difficult to hide. Again, in my experience, the thickness of the film stock the decal is printed on is the main issue as to how well decals will become "hidden." And while flat coating helps in this process, remember you are spraying everything when you apply the flat spray, so the thickness of the decal is also increasing.
Still personally, I will continue to use K4 decals for their variety and selection. Plus their service is first rate, not to mention very good prices too. Microscale doesn't have anything near the selection of decals if you want them in either 0 or S scales.
In case anyone is curious, I know I have posted a list of available decal suppliers in my 027 repaint thread linked below.