I agree, but as a the school's cheerleading squad shouldn't the expectation for them in their "official" capacity be to represent all students?
The school should shut this kind of activity down because it doesn't align with their mission as a cheerleaders is. They are completely free to do whatever they want on their own time when they aren't acting on behalf of the school. Notice I'm not specifically saying the establishment clause was violated here. I think there are other issues at play here as well.
Realistically, there is no way that cheerleaders could ever represent every student in the entire school. What about students that don't like cheerleading for one reason or another? Should they disband? What about students that want them to wear different uniforms, do different cheers, etc. It is impossible because everyone is diverse---which is completely fine. Just like one politician cannot possibly represent his constituents on every issue.
They will just have to pick their battles. I am not saying that this is a good decision by the cheerleaders because it does alienate people more than say picking one cheer/chant over another. But I have no issue with cheerleaders being able to do this legally and the same would go if they were Muslim cheerleaders putting a quote from the Kuran.
By the way, where does it state freedom from religion in the Constitution? I know the First Amendment states that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof;"
Where in that clause does it say that these cheerleaders can't put Biblical quotes on a sign during a school sanctioned event? All that clause points to is making laws or not making laws. Unless there is another area of the Constitution that says government must be free from religion.