The student is not required to step on the paper. If the student doesn't want to step on it, they will not be forced or coerced to do so. The exercise expects that most students will not step on the paper.
The point of the exercise is to illustrates how we reify words.
If you write your name on a piece of paper, and someone steps on it, are you harmed at all by this action? Of course not. It's a piece of paper with some ink on it, not a mystical link to your soul.
If you receive a flyer from Walmart with a big American flag all over it, and you throw it in the trash, are you insulting your nation's flag? Of course not, you probably don't even think about it. Even if you stepped on it, willingly, that does not prove that you're unpatriotic or un-American. It shows that you can distinguish between a symbol and a real object.
Or, in other scenarios, this exercise used to reinforce and discuss one's faith[/b], as it makes people explain why they won't step on the paper.
Most people fail to understand the power of words and representations, and separate the symbol from the real object. The exercise tries to make this clear. And the exercise is over 30 years old -- and this is the first complaint. So yes, it has intellectual merit.
Nor was the student suspended for a refusal to step on the paper -- as that's what most students did. He was suspended because the teacher claims the student threatened him after class.