1. There's no guarantee the school lets it go back on
2. There's nothing saying that her parents would allow or could allow such a party to happen
3. Still deprives her of what is considered by many a integral childhood memory and puts the students into a situation of choosing one or the other.
Not to mention that:
1. Causes the issue to stay in place and for the discrimination to continue on
2. Reinforces to the school that they can get away with things simply by punishing everyone in an over reactive manner rather than deal with their bigotry.
This is solely the schools fault. If they were in the right with this rule then they could just say "we're not changing it, if you want to sue sue, you'll lose" and could have the prom. If they know they're not in the right and they'd lose then they're trying to circumvent having to actually follow the law by punishing every single kid in the school. If they're unsure as to whether they'd win or not, they are still trying to potentially circumvent having to follow the law by punishing every single kid in the school.
It should be the school buckling, not the kid.