Let $\left\{M_{\lambda}\right\}$ be a family of flat $A$-modules and define $M = \bigoplus_{\lambda} M_{\lambda}$. Let $0 \rightarrow N' \rightarrow N$ be an exact sequence of $A$-modules. Tensoring with $M$ gives $N' \otimes M \rightarrow N \otimes M$ or $\bigoplus_{\lambda} [N' \otimes M_{\lambda}] \rightarrow \bigoplus_{\lambda} [N \otimes M_{\lambda}]$. Each of the coordinate maps is a monomorphism, hence we actually have an exact sequence $0 \rightarrow \bigoplus_{\lambda} [N' \otimes M_{\lambda}] \rightarrow \bigoplus_{\lambda} [N \otimes M_{\lambda}]$ and so $\bigoplus_{\lambda} M_{\lambda}$ is flat.
Question 1: Is the above argument accurate?
Question 2: Does the above argument work for the direct product $\prod_{\lambda} M_{\lambda}$ as well?