hiya XS;
my thoughts are that the behavior enough is enough to warrant the cancellation.
i also don't think that the school has any right, moral or otherwise to tell parents how to spend their money.
that said, they DO have every right to disapprove, not endorse or sanction that which conflicts with their teachings.
the only thing a church person (priest/minister/rabbi) ever told me about money was to give them more of it.
my daughter's school does what it can to prevent this stuff. as they are all girls, the boys have to sign a contract saying they will conduct themselves properly etc in advance of the dance, signed by their headmasters. the girls have to have their dresses okayed by the dean of students so they cannot show up half naked in some hootchie outfit, if their dress doesn't pass muster, she has school sweaters there that they must wear over the dress. they have a receiving line of administration and faculty that the kids must go through shaking hands and exchanging pleasantries so that the smell of alcohol might be detected. they also know in advance who is coming, so that kids can't say they are going to the prom, but go elsewhere, because the school will call the parents house if the kids do not show up. they also lock them in, so that they can't put in an appearance and then leave to party elsewhere. the schools do WHAT THEY CAN to cut down on this crap, but if the parents are not complicit in helping avoid the bad stuff, it is a losing battle.