An employment tribunal also amended its judgment at the last minute to rebuke government ministers, including the prime minister, for commenting on the highly controversial issue last week, while it was still sub judice.
The core of Aishah Azmi's case - direct and indirect discrimination on religious grounds - was dismissed by the tribunal in Leeds along with her claim that she had suffered harassment. Her solicitors announced an immediate appeal to the employment appeal tribunal and moves to take the issue to the European court of justice.
Mrs Azmi, who is 23 and has been suspended since September from Headfield Church of England junior school in Dewsbury, said she was also considering complaints against the prime minister and other members of the government for alleged breaches of the ministerial code of conduct.
Clearly disappointed, she said: "Ministers' intervention in my case, against the code, makes me fearful of the consequences for Muslim women in this country who want to work. Muslim women who wear the veil are not aliens. Politicians need to recognise that what they say can have a very dangerous impact on the lives of the minorities they treat as outcasts."
The tribunal said it had reached a decision before ministers spoke out about the case, but criticised their interventions as "most unfortunate".
Mrs Azmi was sent home within a month of starting work last September at Headfield, a school with a large majority of British Asian pupils, where she was a classroom assistant in maths and literacy lessons for children aged between 10 and 12.
The school initially agreed she could wear the veil when a man was present, but the agreement broke down after three weeks when one of the male staff objected to her face being covered while teaching. Mrs Azmi was initially given sick leave but was suspended in February on her full pay of some £11,000 when she returned to work but still insisted on covering up.
Her solicitor, Nick Whittingham, practice manager of Kirklees Law Centre, said the dismissal of the discrimination complaints was disappointing but it was significant that she had won on the handling of her case.
Kirklees welcomed the main verdicts last night as the right decision on a difficult balance between the "rights of local children to the best quality education possible and Mrs Azmi's desire to express her cultural beliefs by wearing a veil in class". In a statement, the council revealed that monitors had watched Mrs Azmi's teaching and children's responses for an agreed period before the decision to ask her to remove the covering was taken.
Headfield has offered to reinstate Mrs Azmi provided she removes her veil while teaching. But she made it clear last night she would be concentrating on further legal moves. Mr Whittingham said a decision on her future was now in the hands of the school and Kirklees, which are expected to end her employment.
Outside the school this week, there was virtually unanimous support for the school's stand, from British Asian parents as much as white ones. Pupils from all communities were also vociferous about some of their friends having problems understanding Mrs Azmi when she was veiled.
Case has further to go
Although Aishah Azmi faces calls to drop her action for the sake of community relations, it is almost certain to proceed (and be legally aided after costing an estimated £10,000 so far) as an test of the 2004 Employment Equality (Religion or Belief) Regulations.
Mrs Azmi claimed direct discrimination, removing her veil being against her beliefs, and indirect discrimination because the ban was a general practice which put her at a particular disadvantage. She claimed harassment by alleging the school's attitude hardened when she took legal action. Her victimisation claim, which succeeded, was because the school and Kirklees did not follow grievance procedures correctly.
The case goes to an employment appeal tribunal and, if necessary, to higher courts and, ultimately, the European court of justice.