That's what I thought. The Bishop might not be able to order the student reinstated (as if she'd want to continue there anyway), but he can certainly make life absolutely miserable for the school.
In my experience with hostile psuedo-Catholic officials, one of the first things they like to resort to is an allegation of slander as a thinly-veiled threat of a lawsuit. As I posted last night on a different thread, the allegation of slander can itself be slander, and I'd urge the Sills family to seriously consider all their legal arguments and remedies.
The school could have gotten away with expelling the student for whatever short-sighted and stupid reason they wanted to, but they may have gone overboard with the slander accusation, and that may provide a direct path for the Bishop to take action against the school.
Yes, I was going to point out that the bishop could disinvite the order from his diocese.
But that would be the equivalent of firing off an ICBM. For one thing, he would then lose a valuable Catholic school--or what should be a valuable Catholic school if they manage to get themselves straightened out.
One place the Sills family might consider going to for advice is the St. Joseph Foundation, which specializes in helping Catholics with canon law problems. In particular, they endeavor to defend orthodoxy against the incursions of bullying dissidents.
http://www.st-joseph-foundation.org/
Those statements arguing that institutions run by religious orders have complete freedom to do as they please are exaggerating their independence. The bishop could revoke the order's right to operate any "Catholic" educational activities within the diocese on the grounds of posing a danger to the faith and well-being of Catholic children. Since the incident involving the pro-abortion teacher was a matter of public scandal, this expulsion could hardly be designated a purely "internal matter" of the order of nuns.