How the principal should respond to the aggrieved students according to the values and the practical guideline in national policy on religion and education so that their religious identities are recognised and not insulted?

A principal that faces a constraint that involves religious issues should base on the moral ethics. This is a valid stand since it would not take bias even on religion. Except on special cases where actions acceptable to a specific faith are involved, one can consider taking them on another perspective.

Ithink the answer is b. shakeri hope im not wrong : )

Yeah u should that's the right thing