The effect of SP and Reputation are independent. This is the reason why this @dang007 despite having some million SP, can't put a ding in l0k1's 69.8 reputation score. I am not sure of the ratio, but it is probably logarithmic. Each extra number upwards takes 10 or 100x as many upvotes, from some amount of reputation score, to have an effect. In fact, when l0k1 downvotes an account with a low Rep like even as high as 50, it is similar in its result on reputation as a million SP is against anything.

The reputation score is on the chain, but it does not have an impact on anything except as a mechanism to enable an interface to suppress the appearance of posts, based on well respected, established accounts with high Reputation, or a sufficient cumulative number of such accounts whose total score adds to an equivalent amount, as to SP, where l0k1's rep behaves towards the reputation of other accounts.

The first time @dang007 flagged one of my posts, one of our allies came in directly with an upvote to counter it. For the sake of interest, I wanted to see what would happen if for the second incident, nobody inside the #steem-coop, or even curious bystanders, brought the necessary counter. Sure enough, it came, and now the posts are even more visible for having flags, and still a substantial reward after some seriously fantastical downvotes on it. *Noticing it reappear, @dang007 has now removed, and then re-added a stronger flag to again bury the post. To do any real damage to my accounts, he will need to persuade a respected member of the community to flag my posts. For fun, I have posted a provocation about this:

https://steemit.com/crypto/@dang007/all-the-coins-are-so-cheap-im-thinking-of-getting-more#@elfspice/re-dang007-all-the-coins-are-so-cheap-im-thinking-of-getting-more-20170714t064645032z

I am not sure there is any problem that needs fixing, with the reputation system. I think it has demonstrated directly this last 24 hours how well it actually does work.