This is once again a case of sensible parents rights being overshadowed by the fact that there are people who dont make the effort to feed their kids correctly. They need to target the rules to those who need it rather than a blanket approach to all.
Personally, my kids get more than their 5 a day, eat a heathy diet, do plenty of sports and other activities and if I want to stick a chocolate bar in their lunchbox, then i think that i should be allowed to do so. Incidentally, our school does follow a healthy eating policy but chooses to use persuasion and rewards for making healthy choices rather than policing and punishment.
Why the school thought to humiliate your grandson over the lolly, I don't know. Surely a more measured reaction would have been to ask him not to eat it as it is school policy not to allow sweets and then stck a note in his bag back to his parent.
I do agree that schools have to have rules, but this does seem over the top.