Why the principal? It would take the teacher to be an injured party in this situation. Are you suggesting the unsuspecting teacher bit on the principal's ACLU bait? That doesn't make sense.
They could be in it together to create a case to challenge the law.
If the principal was trying to create a "test case" for the ACLU, in all likelihood he would do it in tandem with the teacher. I'm not saying that's an absolute - but in this case, the question is not whether or not the injured teacher has a case against the school, but whether or not the law is constitutional.
Of course, the principal could just be trying to enforce the law, and the teacher could be trying to make waves. Regardless, it will serve the purpose, and that is to get the law overturned.
As I said earlier, the law needs to be clarified so as to keep foreign flags from being elevated or equal to the American flag in public places, while allowing for the subset display of flags as teaching aids.
This is the only way it could possibly be revoked, and unfortunately, it sounds like they have found the "chink" in the armor and exploited it.