Like most of the things people lambast as political correctness, this has nothing to do with the term itself.
It's become a catch-all used to describe anything people (particularly conservatives) dislike, and ironically enough, it allows those who wield the term to stultify debate regarding the merits or demerits of an idea simply because it has such a universally negative connotation.
Strictly speaking, political correctness refers to topics or views which are regarded as offensive in polite society, for fear that it would offend some minority's views. It's supposed to refer to censorship by popular opinion, but nowadays it's become the same as saying 'I don't like this change, blooming minorities, what happened to the good old days?'
This woman's views are clearly not representative of any 'popular opinion'. At worst, it's just some barmy idea that the headteacher had on a training day, while trying to make her school seem more welcoming. In truth, it's probably just the choice of new logo she decided to go with, and her quote is in reference to that. There's no evidence that she's actually 'banned' the word at all... even in the article itself. Typical Murdoch red-top sensationalism.
