In June 2004, the U.S. Supreme Court ruled that Californian atheist Michael Newdow could not challenge the pledge's phrase "under God" on behalf of his daughter because he did not have full legal control over her.
Newdow immediately filed a new federal case in which he offered to represent two families against the Elk Grove Unified School District, the same Sacramento-area district he had previously sued.
...Judge Lawrence Karlton said: "The court concludes that it is bound by the Ninth Circuit's previous determination that the school district's policy with regard to the pledge is an unconstitutional violation of the children's right to be free from a coercive requirement to affirm God."
IMHO, pledging allegiance to a piece of cloth is a bad idea in the first place, a primary confusion of symbol with substance. And indoctrinating children in this mindlessly nationalistic ritual a bad idea whether you take the "under God" phrase out (thus restoring it to it's original form) or not.