People have this sort of belief that the least little things will cause children some sort of permanent psychological damage. Young children are more resilient than you might think to the words and actions of other children (as compared to adults), and I don't think the exposure to the word "hell" or to another student's religious beliefs would really have caused a problem, even had the school done nothing. If she truly believes that her classmate is going to hell, I see no reason why she shouldn't be able to say that. Most likely the boy would have just dismissed her thoughts as ridiculous. If the boy had been told the same by, say, his parents or a teacher, it might have been a bigger deal.
On an only slightly related side note, I knew students in grade school that spouted that same idea (i.e. swearing to God leads to damnation). It never seemed caused any problems. Either they believe it and stop using the phrase "swear to god" (which isn't exactly a problem) or they don't believe it, and just go about their lives.
Honestly, schools make big issues out of all the wrong problems.
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