I'll try to respond to your concerns below...
"Jesus did not fellowship with the people. He circulated among them, then separated Himself to teach, and nurture His immediate followers, the twelve."
Jesus most certainly ate with "sinners." The post I was referring to (I quoted it) defined fellowship as "(eating, etc)."
"Indeed, Paul was preaching to the converted. This was a Christian School. How would it NOT apply?"
I'm not entirely certain, but I would not equate a Christian school with a church. Christian schools where I live have many, many non-Christian students. They are meant to be primarily outreaches to the community, not primarily places of worship. Paul was talking about a church member in the verse you mention. The school has the task of deciding whether such a directive applies to its students, as well. They made a decision that you agree with in this case, but could easily have interpreted the situation differently.
"Her parents have no issue they can sue for."
Anyone can sue for anything, and they certainly have in the past (e.g., James Dale got all the way to the Supreme Court over a private organization). Fortunately, the parents decided not to make a fuss. I think that's an admirable course of action in such a situation.
"They say they have been together for 22 yrs, these two 'parents'. So where did the kids come from?"
I imagine that they came from the same place as kids in infertile heterosexual relationships (e.g., IVF or adoption).
"Where do you think they are headed."
I'm optimistic about them, compared with a lot of kids today. They've apparently lived in stable two-parent home for their whole lives, they have parents who cared enough to put them in a Christian school, and who were mature enough not to overreact and make them a cause celebre when they were booted.
It may not be the best parenting situation, but it compares favorably to some others that I'm aware of.
"It is also not "Christian", to discount Scripture, because you "feel" bad about the kids. But, I guess you don't have those standards, by which to measure..."
I'll leave that to your judgment, since you are apparently much holier than I am...
You put that very well. Kudos, Kahonek.