I'm pretty much in agreement with Adam's answer. But I'd want to do some serious testing compared to an alternative.
The issue I see is that you need to not only select the rows, but also do an update of those rows. While that should be pretty fast, I'd like to avoid the update. And avoid having any large transactions hanging around (see below).
The alternative would be to add CREATE_DATE date default sysdate. Index that. And then select records where create_date >= (start date/time of your previous select).
But I don't have enough data on the relative costs of setting a sysdate as default vs. setting a value of Y, updating the function based vs. date index, and doing a range select on the date vs. a specific select on a single value for the Y. You'll probably want to preserve stats or hint the query to use the index on the Y/N column, and definitely want to use a hint on a date column -- the stats on the date column will almost certainly be old.
If data are also being added to the table continuously, including during the period when your query is running, you need to watch out for transaction control. After all, you don't want to read 100,000 records that have the flag = Y, then do your update on 120,000, including the 20,000 that arrived when you query was running.
In the flag case, there are two easy ways: SET TRANSACTION before your select and commit after your update, or start by doing an update from Y to Q, then do your select for those that are Q, and then update to N. Oracle's read consistency is wonderful but needs to be handled with care.
For the date column version, if you don't mind a risk of processing a few rows more than once, just update your table that has the last processed date/time immediately before you do your select.
If there's not much information in the table, consider making it Index Organized.