So in my humble opinion this is a great sign. I received a FLAS for my MA studies and it is 50% funded by the Dept of Education and 50% funded by your University/Program. If a program is considering putting up 50% of the cost of your tuition/stipend/healthcare that seems like an indicator they are likely going to offer admission. If they weren't seriously considering your application I doubt they'd waste your time.
FYI when I received a FLAS for one year it covered my full tuition, $15,000 stipend, and healthcare. At my school it required you take formal (or even somewhat informal!) language training and additionally one related area course per semester. However, 'area course' is very loosely defined. I sold a theory class as an area course by stating my paper topic involved East Asia. The application process was simple and not overly time consuming.