I'm not surprised at this conflict, knowing the people in this area fairly well already, having owned a home in Gilroy, just ten miles from where this happened. Kids there will seem to be uninhibited, and the kids wore the American flag that day just as a reminder how lucky immigrants are to be able to have that celebration of Mexican heritage here in America.
Here's another kid-flag confrontation recently:
http://www.chron.com/disp/story.mpl/metropolitan/6995047.html
I saw this story on Fox News last night, where they interviewed Morris. I couldn't find it, but it'll probably come up today or tomorrow in a websearch, and I'll post it here.
I think the boy was right to take matters into his own hands, because if he had just complained, he would have been ignored. No flag should be displayed above the American flag. Look at the passion this same disrespect caused in Reno:
http://www.dailymotion.com/video/x34ak2_mexican-flags_news
.