Over-reaction aside, the fact remains she could have given the speech the way she knew she should have & the way it was presented for approval and she'd have her diploma in hand. Obviously a smart kid, you don't graduate with a 4.0 without knowing how to play the game, it was a little naive of her to try to sneak it in and think nothing would be said.
I wonder if they really can hold it indefinitely for an apology letter? It'll be interesting to see where it goes from here.
I highly doubt it. She earned it. Her speech wasn't a graded part of her curriculum. Her parents probably paid ad-velorem tax in the district. I'd think they could loose their state funding for these types of shenanigans. Personally, I think the principal should be stripped of his teaching credentials. Anyone that stupid has no business teaching kids!