a) The Morris dancers are allowed to dance. Everybody has a good time, and no one tries to make an issue where none exists. A large number of children from ethnic minority groups in the area get exposure to an aspect of British culture which they might otherwise not see, and another small step towards the appreciation of cultural diversity is made.
b) The Morris dancers are not allowed to dance. The press get hold of the story, which then makes the actions of the Head (and, by implication, the anti-racist movement in general) look stupid and petty in the eyes of Joe Public. The far right can then cite it as yet another example where white British people are being pushed around by others.