I agree with you, but to me, there is also another issue here.
From "The Flag Code" (United States Code, Title 4, Chapter 1):
Want to know what really grinds my ass? Many of the same people who dare to call others anti-American are the very same people who attached flags to the windows of their cars after 911, and drove around, showing the rest of us how patriotic they were, in rain and snow, and other inclement weather, until the flags were ripped from the wind, before they threw the flags in the garbage can, and then bought new flags and did it again, and again. Who is the anti-American here? It certainly is the school, and it certainly is those who disrespect the flag too.
Now I will be the first to agree with you that the school made it's decision for the wrong reason, and they are douche bags for that. But attaching the flag to a bicycle, or car, or any other moving vehicle, must be done with care, and that the Flag Code must be observed at all times.
From your own link:
That says it all. The boy needs to be taught proper care of the flag. You can't put it on your bike for 2 months. It must be put it up and taken down each day, with due diligence, and must be taken down in inclement weather. In Washington DC, where Federal laws apply, what he is doing amounts to a $100 fine per occurrence.
Now I am sure that some of you are going to accuse me of being nit-picky. I assure you that I am not. Our flag represents us. Our flag represents America. Those who don't properly take care of the flag disrespect America.