The Seventh Circuit Court of Appeals yesterday issued a very interesting decision (pdf), granting a preliminary injunction to allow a high school student to wear a t-shirt reading "Be Happy, Not Gay" in order to express his belief in the sinfulness of homosexuality and to protest the Day of Silence.
I've yet read the whole decision carefully, so I may revise my opinions here but: Judge Posner wrote what I think is on the whole a quite thoughtful and sensitive opinion, as did Judge Rovner, concurring in the judgment. To sketch things very very simply, Posner took a strong view of the school's ability to regulate derogatory speech about minority groups, but felt that at least at this preliminary stage it wasn't shown that the statement was sufficiently derogatory to merit censorship. Rovner was more convinced than Posner that the shirt's wording was clearly derogatory and hurtful, but took a more limited view of schools' power to limit such speech. Posner seemed more open than Rovner to the possibility that the school might ultimately be able to justify its actions. Notably, both took seriously the problem of anti-gay harassment in schools, but whereas Posner thought schools may regulate anti-gay speech but must do so carefully, Rovner thought schools had no power to regulate it at all unless it was shown to concretely impede school functions, e.g. by starting fights.
The court did not mention Harper v. Poway Unified School District, in which the Ninth Circuit in 2006 denied a preliminary injunction (pdf) in a similar case involving a shirt that said "Homosexuality is Shameful." Justice Reinhardt's opinion there is also quite interesting and no doubt was read and considered by the judges heres, but was not cited because the Supreme Court later vacated the decision and ordered the case dismissed as moot. For what it's worth, I think the two decisions could be reconciled on the ground that the statement in Poway is more obviously inflammatory and hurtful.
EDIT: Prof. Eugene Volokh has a rather different take on the decision, and lively discussion follows over at the Volokh Conspiracy.