I love how this is turning into a discrimination thread. Why must people cry homophobia over small things like this?
This is not a matter of censorship. From what the article states, it's clearly a one time, first time incident. The boy might not even be gay or into crossdressing. He simply was fulfilling a bet and used school grounds to do so.
I think that the principal may have been acting out of concern for the instructional day. Since this kid has not done the cross dressing before, his sudden showing up in drag is likely to cause distractions throughout the day. It wouldn't cause distractions if he cross dresses daily. Still, it is probably going to cause disruption.
There might also be a dress code in place. I live in the USA and the district I work for has a uniform policy.