I would begin taking it up with the boys mother, the education department and the school all at once.

The situation is clearly not being dealt with by the principal, so perhaps it is time to get a little dirty yourself. A casual reference to Neil Mitchell (or your QLD counterpart), the local paper or the Telegragh should be enough to push the coward int action.
People will walk all over you if you let them, so dont let this principal, through ignorance and idiocy affect how your DS will grow up, learn, emotionally develop and live for the rest of his live by allowing it to happen.
If the principal isnt willing to take a stand, make him.

I really hope Ethan is ok I suffered bullying all the way through school and I wish I could say it didnt affect who I am, but it did, and not in a good way...except that now I stand up for myself.

Good luck