The problem with this story is that this school decided upon certain rules and were completely upfront with them. If you don't like the school's rules, go somewhere else (as the woman is doing) and don't try to impose your morality (or immorality) upon the school. I wouldn't qualify for enrolling my kids, and I'm not the least offended by that fact. To each his own.
You are right that they did make their rules and were up front about them. My problem with them is characterizing that as being "Christian". They have a legal right to kick that child out. I just don't think that Jesus would have done so.