There seems to be more to this issue, Paul. One is, the school has issued a ban against displaying any country’s flag in a T-shirt. One would think an exception could be made for the U.S. flag, but that might risk an equal-protection challenge.
The other thing is, U.S. Flag Code, section (d), states: “The flag should never be used as wearing apparel, bedding, or drapery.”
The kids could get around both of these by wearing red, white, and blue.