I also think there is a very good reason for children to be in shalwar kameez ... firstly the kids will be able to do wudu properly and easily and should be clean and adjusted mindset and all for the masjid. Also, the kids are identifiable to that madrassa and if they loiter around the masajid/madrassa staff can do something. Dressed in something other than shalwar kameez may be confusing to the Imam or teacher about who is in the class and who is not.
Unfortunately in my mind, none of these reasons actually make too much sense. However, instead of arguing here, I think DC just needs to talk to the teacher and understand what reason they have to be so attracted towards Shalwar Kameez for boys, so much so, that not only do they encourage it, but go to the extent of being harsh on kids who are not dressed as such.
If for a moment, we assume that Islam really is in a dress, then dressing in taub and topi (the whole Arabic style) is probably much more islamic than desi styled-shalwar kameez. However, thats just a personal opinion, cz other than covering our sitr, I don't think Islam really limits us to a particular dress. I do understand if in a school they have a particular dress code, and like it or not, SK it is for this madrassah selected by DC for his child.
Once DC figures out the reason for their insistence on SK, then he can decide whether his kid is actually going to a place of learning or place of ignorance.