Here's two versions that work.
The first uses the slightly advanced \redraw command from the version on github (Warning: that repository needs a clean-up; the only file that matters is spath3.dtx). This was mentioned in the comments. The update evaluates the coordinate passed to \redraw at evaluation time rather than invocation time. This allows for the coordinates defined by the knot drawing routine to be used making it easier to target a specific intersection.
\begin{tikzpicture}
\definecolor{blue1}{RGB}{0,129,188}
\definecolor{yellow1}{RGB}{252,177,49}
\definecolor{black1}{RGB}{35,34,35}
\definecolor{green1}{RGB}{0,157,87}
\definecolor{red1}{RGB}{238,50,78}
\begin{knot}[
clip width=1.5pt,
name=olympic,
]
\strand[line width=0.25cm,red1] (3,0) circle(1.25cm);
\strand[line width=0.25cm,green1] (1.5,-1.375) circle(1.25cm);
\strand[line width=0.25cm,black1] (0,0) circle(1.25cm);
\strand[line width=0.25cm,yellow1] (-1.5,-1.375) circle(1.25cm);
\strand[line width=0.25cm,blue1] (-3,0) circle(1.25cm);
\flipcrossings{2,4,6,8}
\redraw{2}{(olympic 3)}
\end{knot}
\end{tikzpicture}
Result:

The second version plays with the clip width and clip radius a little bit to get it right the first time. I'm beginning to think that these are not named very well as even I keep getting them confused! In short, when an intersection is flipped then it is redrawn with the strands in the opposite order so that what was the under-strand is now the over-strand. In order to ensure that this only affects the specified crossing, the redraw is clipped to a circle around that crossing. The radius of this clipping circle is given by the key clip radius and is a dimension. The goal with this is to set it as small as possible to minimise the effect of redrawing while making it big enough for the redraw to be successful.
The clip width is something separate. When each strand is drawn, it is first drawn a little thicker and the colour of the background. This is to achieve the "cutting out" effect whereby the over-strand "cuts out" a part of whatever is under it. The clip width affects the line width of this cutting path. It is a multiplier and the line width of the cutting path is this multiplier times by the line width of the drawn strand. The idea here is to make it easier to vary the line width and keep the diagram in proportion.
So here's a version shrinking the clip radius to ensure that the problem intersection doesn't affect the neighbouring intersection and then adjusting the clip width so that the cut-out is properly drawn within the clipping circle.
This should work with the current version of knots on CTAN.
\begin{tikzpicture}
\definecolor{blue1}{RGB}{0,129,188}
\definecolor{yellow1}{RGB}{252,177,49}
\definecolor{black1}{RGB}{35,34,35}
\definecolor{green1}{RGB}{0,157,87}
\definecolor{red1}{RGB}{238,50,78}
\begin{knot}[
clip width=1.4,
clip radius=0.31cm
]
\strand[line width=0.25cm,red1] (3,0) circle(1.25cm);
\strand[line width=0.25cm,green1] (1.5,-1.375) circle(1.25cm);
\strand[line width=0.25cm,black1] (0,0) circle(1.25cm);
\strand[line width=0.25cm,yellow1] (-1.5,-1.375) circle(1.25cm);
\strand[line width=0.25cm,blue1] (-3,0) circle(1.25cm);
\flipcrossings{2,4,6,8}
\end{knot}
\end{tikzpicture}
Result:

Full code:
\documentclass{article}
%\url{http://tex.stackexchange.com/q/323758/86}
\usepackage{tikz}
\usetikzlibrary{knots}
\begin{document}
\begin{tikzpicture}
\definecolor{blue1}{RGB}{0,129,188}
\definecolor{yellow1}{RGB}{252,177,49}
\definecolor{black1}{RGB}{35,34,35}
\definecolor{green1}{RGB}{0,157,87}
\definecolor{red1}{RGB}{238,50,78}
\begin{knot}[
clip width=1.4,
clip radius=0.31cm
]
\strand[line width=0.25cm,red1] (3,0) circle(1.25cm);
\strand[line width=0.25cm,green1] (1.5,-1.375) circle(1.25cm);
\strand[line width=0.25cm,black1] (0,0) circle(1.25cm);
\strand[line width=0.25cm,yellow1] (-1.5,-1.375) circle(1.25cm);
\strand[line width=0.25cm,blue1] (-3,0) circle(1.25cm);
\flipcrossings{2,4,6,8}
\end{knot}
\end{tikzpicture}
\vspace{2cm}
\begin{tikzpicture}
\definecolor{blue1}{RGB}{0,129,188}
\definecolor{yellow1}{RGB}{252,177,49}
\definecolor{black1}{RGB}{35,34,35}
\definecolor{green1}{RGB}{0,157,87}
\definecolor{red1}{RGB}{238,50,78}
\begin{knot}[
clip width=1.5pt,
name=olympic,
]
\strand[line width=0.25cm,red1] (3,0) circle(1.25cm);
\strand[line width=0.25cm,green1] (1.5,-1.375) circle(1.25cm);
\strand[line width=0.25cm,black1] (0,0) circle(1.25cm);
\strand[line width=0.25cm,yellow1] (-1.5,-1.375) circle(1.25cm);
\strand[line width=0.25cm,blue1] (-3,0) circle(1.25cm);
\flipcrossings{2,4,6,8}
\redraw{2}{(olympic 3)}
\end{knot}
\end{tikzpicture}
\end{document}
knotenvironment as I'd expect. For example,every strand/.style={whatever}seems to have no effect. I need to separately do a TikZ set and thenknot diagram, every strand ...which isn't what the manual suggests at all, unless I'm completely misreading it. (It isn't very clear, but usingknot diagram/every knot diagram, as recommended, doesn't seem to work. At least, I couldn't make it work. Nor can I get the\redrawto do anything much. (I thought I could redo the problematic crossing, but I can't work it out.) Key handling is odd. – cfr Aug 08 '16 at 14:51\redrawcommand. – Andrew Stacey Aug 10 '16 at 19:09\redrawbut it didn't help. The OP should likely try your update, then. – cfr Aug 11 '16 at 16:00