Assuming that these are reasonable restrictions, I don't necessarily disagree, but I don't think the school district is arguing that she tore down the sign because of time, place, and manner restrictions (are all signs prohibited on school "time," whatever that is?), but I think it's pretty clear that she tore down the sign because of the message.
Let's be honest: if the sign had said "Go USA! Win the Gold!" do you think the principal would have ran over and torn down the sign?
As far as your last question, the message was nonsensical. It doesn't mean anything, and the kid has said that it didn't mean anything--he saw a bumper sticker on a skateboard and he thought it would be a clever way to get his teacher riled up. Yes, it's juvenile, but that's not a judgment call I want a teacher making any more than I want a teacher making a judgment call on whether a student can hold up a sign during a football game that says "John 3:16."
No I do not.
I would categorize it not only as a time based restriction, but a manner based restriction. The manner in which he presented his message was offensive. Protected speech can be offensive it the part that gives offense is critical part of the message or a critical part of delivering the message effectively. I don't really understand what message he was trying to present, so it's difficult for me to gage if he needed to be offensive, but I'm skeptical.
I also don't think that bans based on the content are entirely unconstitutional, but they face a very high level of scrutiny. ie. You cannot make credible threats to the life of the President.
Since a lot of this is theoretical anyway, let me suggest a slightly different scenario.
Let me say the message is that he disapproves of laws and regulations restricting the use of Marijuana.
What if he presented a sign saying "Marijuana is not a performance enhancing drug" as a criticism of the Olympics testing (or at least having tested in the past) for Marijuana use among their drug tests.
You can make an argument that it was not the right time and place for his bong hits for Jesus sign, but that argument is weakened if he relates the message to the event. It would be a much harder to ban that sign unless the school had a policy of banning the students from holding up any signs at such events.
One of the fears the SCOTUS expressed was that authorities at schools could not be expected to know exactly what to do in regards to different free speech scenarios. Fine! If they're not sure what to do, call counsel! I know I do at every turn as a businessman.
Before reacting in a violent manner, as in this case destroying the student's private property, get counsel lest the "John 3:16" sign at a football game be next.
"Free speech never takes (Bongs)hit!"