I can see both sides of this, I really can. But I have to agree with the schools. If you allow one kid to get away with it, for whatever reason, it just opens to door to a landslide. My sis went through the same thing when she let her daughter have pink highlights in her hair up in VA, it was a nightmare! Again, I can see both sides.
Just trying to think like a school (and this is coming from someone who had half of their head shaved in HS!) But I suspect that if kids were unable to show their affiliation with their clothing, then they might move on to hair? Maybe a stripe, or symbol, or number buzzed in?