"Rules like that should always be up for interpretation. Obviously there was an incident in the past that made this rule necessary"
Agreed. The thinking was probably that somebody wore jewelery that was unsafe, and will test boundaries if any jewelry is permitted. People will test it - big chain, spiked ear ring, etc. Schools that have strict uniforms still have numerous uniform issues that arise b/c kids will find a way to wear something questionable.
As a coach, I would say something to the kid or his coach, not not DQ the kid unless it gave the athlete a competitive advantage or was unsafe.