My "first point" was not in order of importance, but following along in the order in which it is in the post. And yes, I have repurposed bags in my own childhood and with my own children.

Clearly this school has a zero-tolerance policy on bringing knives to school. Which means that the child and the parents have to make certain that knives can't be at school at all, ever, for any reason or the child is suspended. So it becomes the child's or their parent's responsibility to make sure that he or she is not carrying one. It's necessary to have a system in place for a child to prevent this from happening. This is no time to be forgetful, but rather to be vigilant. There is no reason why any child can't make removing their knife a part of their post-outdoors routine. If that's not possible for some reason, get a cheap bag for school only.

If the school goes easy on even one child for having a knife, others will do the same, and not everyone is as pure-hearted as the kid in this particular story. Kids with malicious intent exist. And zero-tolerance makes sure that no one gets away with it, and that's for the benefit of all.