Other jets won't care about your IFF settings. They just magically check the coalition of your jet (red/blue) within the game engine and don't care about your cockpit settings.
Uhm, what issue?
Edit: I just noticed what you might mean:
The Mirage F1 doesn't have an IFF interrogator, meaning it can't interrogate other aircraft. It's only equipped with an IFF transponder to respond to incoming interrogations, although the transponder isn't simulated in DCS and it just happens magically based on the coalition as I said above.