As part of the ruling:
Writing for the panel's majority, Judge Stephen Reinhardt affirmed a lower court's decision against an injunction against the school and said schools may bar slogans believed to be hurtful.
Students "who may be injured by verbal assaults on the basis of a core identifying characteristic such as race, religion, or sexual orientation, have a right to be free from such attacks while on school campuses," Reinhardt wrote.
"The demeaning of young gay and lesbian students in a school environment is detrimental not only to their psychological health and well-being, but also to their educational development," Reinhardt added.
This clearly points out two key issues. First, that even a Judge can't understand what a right is. You do not have a right to be free from speech. There is not injury here.
Second, that having the government run a school opens all sorts of problems. The Constitution says the governement can not limit speech - so even though certainly it's a good idea to have a rule prohibiting certain slogans, the government run school can not (or should not) be able to enforce that rule. In a private school, however, there is no problem having such a rule.
Maybe we would be better off if schools were focused on teaching what rights are instead of worrying about what a t shirt says.