Toujours summed up how things actually stand as far as the law is concerned. People are free to pray and all that as long as the school isn't sponsoring it. So all school sponsored events like football games or dances or rallies can't include prayer unless students want to do it on their own without the specific use of the school facilities (aside from being on school grounds of course).
This is perfectly reasonable. It gives everyone a chance to believe what they want without stepping on the toes of anyone else. I can't see how anyone would be upset with this unless they were trying to impose their beliefs on someone else.