Wayne,
The course was planned in the late 30s directly behind the Williamsburg Inn. Colonial Williamsburg Foundation which operates Colonial Williamsburg, Williamsburg Inn and Lodge, and Golden Horseshoe golf courses was established by the generosity of the Rockefeller family. The plans were shelved in 1941 when the United States entered WW II. A nine hole course was eventually built in 1945-1946 designed by Fred Findley directly behind the Inn on land now occuppied by the Golden Horseshoe Gold course and Spotswood course. You can still see parts of the original Findley course but you need to know what you're looking for. There's plenty of pictures of the original course. I'll ask around if there any records at CW or William and Mary of work done or correspondence with Flynn.
The efforts to preserve Colonial Williamsburg began in the mid 20s which was the same time that the Yorktown CC and Yorktown preservation efforts were beginning. Colonial Williamsburg and Historic Yorktown is only about 11 miles apart. I don't know how much of a rivalry there may have been at that time. From an October 1926 newspaper clipping about the Yorktown CC, "Joe Fuller, a former assistant professional at Hot Springs VA., on recommendation of John D. Rockefeller, Jr. who with Mrs. Rockefeller, frequently had played under his direction, has been made golf professional at Yorktown."
By the late 30s the YCC land had been sold to the National Park Service.