The principal should stop being such a pussy, in my opinion. high school kids are going to do things like that no matter what you do to prevent it.
I dont think him getting angry over kids forging his name and labeling him as a perverted and child porn advocating is enough to label him a pussy, do I think suing the kids is the right way to go, but I would personally do something about it (and maybe something public to show flaws in myspace.)
I never had a myspace but know about it through friends and its flaws. I do however have a facebook which in blows myspace out of the water. Not only is it cleaner (both of ads and porn and such) but the layout is crisper and most importantly it has saftey features. Unlike myspace you have to add friends and a network to view photos and talk to people which takes away the opputunities for predators and the like.
Like I said before should the principle sue I dont think so, was his anger warranted.. yes. But what should be really seen from this is are the problems with myspace and the risk it does possess (but I mean at the same time kids will be kids and use what they want and myspace cant really be regulated.)