Isn't it part of the law though, that public school-sponsored events are not allowed to have religious content as part of their ceremony? Or is it 'cause the prayer is done by a student or something( like a loop hole)?
No, it is not part of the statute law, to the best of my knowledge.
I know in CT at my kids' school they do the pledge with the religious content in it. I was gonna say something to the school, but I noticed that CT is one of the states that doesn't have it banned yet.
The "Under God" portion of the Pledge of Allegiance was put there in the 1950's at the behest of the Knights of Columbus (a Catholic men's group to which I belong, although I do not agree with this action).
The courts have heard many challenges to this - in some places they have struck it down, and in other places they have not. I can't really tell you what the law is currently where you are. Typically, it is perfectly legal to have it in the school recital with the words 'Under God' in it, but students are generally (not always) allowed to opt-out of saying it. They're not protected from having to hear it, though. That falls under the category of tough chit, mon.
If anyone has a link for the actual federal laws in question or state law, I'd appreciate it. I've searched around and find anything I'd consider official.
http://en.wikipedia.org/wiki/Pledge_of_Allegiance
The phrase "under God" was incorporated into the Pledge of Allegiance June 14, 1954, by a Joint Resolution of Congress amending §7 of the Flag Code enacted in 1942.[16]
Typically, you're going to find that there are no laws saying "You don't have to say the word "God" in the Pledge of Allegiance." There are no laws saying what you don't have to do. And the only law saying anything about the Pledge of Allegiance is the federal law that says what the official wording of it is. It does not require you to say it either.
You're looking for absolutes with regard to the separation of church and state in the USA. There aren't any. It's all a balancing act, and the balance changes based on time and place. That constant struggle between 'establishment' and 'free exercise'. Perhaps it's best that way.
But one general statement can be made. No one has the right not to be exposed to hearing, seeing, or otherwise being offended by religious statements, displays, writing, utterances, etc, etc. If you think the law protects you from having to hear things you don't want to hear, you're wrong. As long as you have the right to leave, you have not had your rights violated. Like people objecting to dirty words on TV. Turn the channel, bubba. No one forces you to watch that stuff.