I think its a shame that people can't be more sensible about photos and facebook. Thankfully, my DDs nursery has a breath of fresh air approach.
When DD started nursery, I signed an agreement agreeing to her photo being used and being put on facebook. Then when events occur, the nursery itself takes photos and puts them up on facebook. I can then share it to my page, to allow my friends and family to see. Its great - the nursery can edit out photos of children whose parents object, I get to see the whole event without having to bother taking loads of photos, but I get the pictures so I can share them with family a few days later. Anyone who does not want their child on FB, just opts out.
Schools often have ridiculous policies, I know of one school that specifically bans you putting them up on facebook / social networking sites, but allows (or doesn't mention) photos on online photo sharing websites. Too often these policies are not thought through, and people just jump on the bandwagon without having common sense.
I agree though that it is madness to get too worked up about it, and I do have to laugh when some people verge on hypocrisy over it - I know of a mum who gets very shirty if her DC appears in the background of a photo "you don't know who is looking at them", but then has gone and allowed her DC to be photographed for the local newspaper!
To judge on whether this particular photo is appropriate, we need to know several more - what the photo was, what the upset boy was doing, is in the front - or just in the background (there are different legal issues involved then), who is able to see them, and so on... Impossible to answer with so little information.