That is true, except the fact that if he lives in the United States there are laws that protect freedom of religion in school. Do one of these things 1. Tell your parents to call the school to get him to change, if not call the school board, if not sue em, people have won against cases like this. 2. Or just start yelling christmas in his face, and if he asks you "What did you say?" Pull a south park (from the movie) and say "oh im sorry" and pull out a megaphone and yell it.
There was a court case a while ago. In school you don't have you're freedoms to the fullest, the school can dictate them as they please (within reason though). And honestly I doubt that your principal is saying anything to people who verbally say Merry Christmas, just those who put stuff up in the hallway that say Merry Christmas. Him being Jewish he understands how it feels to be left out in the holiday season when everyone runs around saying Merry Christmas, he's probably being considerate of other cultures. At least that's how I feel, being Jewish myself.