Sad part is that this is true - schools tell kids not to call it that because it's offensive.
First of all, why is "not being offensive" now considered "sad?"
Secondly, it's been this way forever. 30 years ago in Hickville, Michigan, we called it "sitting cross-legged." The only reason I know it's been called sitting "Indian style" is because I read a lot of children's books from the '30s and '40s.
Thirdly, what's REALLY offensive is that "criscross-applesauce" is somehow the preferred term vs. "cross-legged" for anybody over the age of 3.