I actually agree with everything you said except that the principal needs an education.
It is a state law that the principal was enforcing. I don't know why the legislature and governor enacted the law but they did.
The principal gave the teacher a chance to remove them until such time that they are allowed under that law and he wouldn't. I take it that the teacher has an agenda other than the education of his students.
I find it suspicious that the two flags the teacher had displayed and wouldn't remove were Mexico and China. They're both hot button issues in our country at present.
That's just my take on it.
I would say that someone got hyper with the rules. "Permanently" means forever. In a geography room, that's not decoration, it's part of the lessson. As in: "how many world flags have the color orange in them? A tree on them? Stripes? Stars? What's the story behind each flag?" I still think there must be more to the story. And I STILL think the principle overeacted.