Nope, you have your history wrong.
That was the original form of the salute during the Pledge, and it was the official form used by Americans until it was changed during WWII, because it was too much like the Nazi salute.
Ours came first, by over 40 years. The Nazis poisoned it, and we changed our form by government decree:
Reciting of the pledge is accompanied by a salute. An early version of the salute, adopted in 1892, was known as the Bellamy salute. It ended with the arm outstretched and the palm upwards. Because of the similarity between the Bellamy salute and the Nazi salute, President Franklin D. Roosevelt instituted the hand-over-the-heart gesture as the salute to be rendered by civilians during the Pledge of Allegiance and the national anthem in the United States, instead of the Bellamy salute. This was done when Congress officially adopted the Flag Code on 22 June 1942.
See many of the posts in this thread for details. The quote above is from here:
http://en.wikipedia.org/wiki/Pledge_of_Allegiance_to_the_Flag_of_the_United_States
This is NOT the salute those kids were doing, in fact, thaks to your post, I did some searching myself, and BEllamy's original recommendations were:
After leaving the pulpit, Francis Bellamy decided to advance his authoritarian ideas through the public schools. Bellamy wrote the Pledge of Allegiance for Youth's Companion, a popular children's magazine. With the aid of the National Education Association, Bellamy and the editors of Youth's Companion got the Pledge adopted as part of the National Public School Celebration on Columbus Day 1892.
I have to admit I never knew there was a two step salute, but to post the picture of the kids doing a SIEG HIEL salute as the plege is misinformative, it was a two step salute with the arm outstretched after a military salute