2. Larry Laugh will not get the last laugh in this case. The Oregon Supreme Court is the court of last resort regarding interpretation of the state's laws and the Oregon constitution. As Pember states, a state supreme court "is the final authority regarding construction of state laws and interpretation of the state constitution."
Had Laugh raised a federal question at trial, (e.g., argued that the state's harassment statute or the state court's interpretation of Article I, Sec. 8 of the state constitution violated the First Amendment of the federal constitution) he might have preserved the right to appeal the state supreme court's decision to the U.S. Supreme Court.
3. Randy Responsible and the other staff of the Square Peg incorrectly believe their First Amendment rights have been violated by the principal. The Supreme Court makes clear in Hazelwood v. Kuhlmeier that "...in light of the special characteristics of the school's environment" schools can review official student publications for style, content and standards.
In the Square Peg case, the paper is a "lab" newspaper. A lab or practicum newspaper falls strictly under the school's authority to review and edit prior to publication, since it is a teaching tool (see home page).
While Gary Guide, the faculty advisor to the Square Peg, could argue that the story is good journalism and follows professional standards and practices, a court would still side with the principal of several grounds. First, the content of the paper violates the privacy of several minors -- the seven identifiable students. Second, a school is not obligated to support student expression that it believes is "inconsistent with the school's basic educational mission." Given the breadth of this standard, much of the criticism of teachers, administrators and local law enforcement officials arguably would fall into this category. Finally, the article contains material the school could deem "vulgar and indecent" and inappropriate for a high school audience (See Pember, pp. 78-83).
So long as the school clearly states that it is not censoring the subject matter, (i.e., it is not censoring because of the ideas being expressed), but rather, is reviewing the style and content of the student publication so that it is appropriate for the school's student population (see, Desilets v. Clearview Bd. of Education), the students will not have a solid argument on First Amendment grounds.