All of this. All of it
The parents seemed to do everything wrong at nearly every step, from what I can gather.
The school, OTOH, did everything RIGHT at every step right down the line. The teacher saw, reported, and sent on. There was a meeting. Parents called. Parents told "take your kid". Parents refused.
That final step was the mistake, for sure, but as in all things hindsight is 20/20 and there is always a sense of distraction and a million things going on in school. Probably the kid was sitting in the office for a while, someone finally remembered he had been there and said 'Okay Ethan, go back to class'. This is how these things happen.