Frighteningly stupid.
All around. The district should have rules about showing movies. Substitutes should have directions to not show movies that aren't rated G and family-appropriate, if they're allowed to show them at all. Even if the subs aren't given rules, they should know better.
Besides that, any even somewhat well-run public school has enough scrutiny of a substitute's classroom to know if something like this is going on.
That substitute must have had a lousy lawyer to not put it back on the administration for inadequate supervision. JMHO