This is a partial transcript from "The O'Reilly Factor," December 20, 2005, that has been edited for clarity.

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BILL O'REILLY, HOST: In "The Factor follow-up" segment tonight, ground zero this year in the Christmas controversy is the town of Plano, Texas, just north of Dallas. Four families of second, third, fourth, and fifth-graders have filed a lawsuit in federal court saying their children were denied their rights of free expression. The case centers around children giving each other religious messages at Christmastime.

Apparently Plano school authorities said students could not do that. For example, passing a pencil that says "Jesus loves me" from one student to another.

Also, school authorities allegedly demanded a holiday party containing only white items, no Christmas colors. The school district's lawyer denies that, but it is being litigated.

Now I made a mistake a few days ago when I said clothing was included in that party dictum. Clothing was not included. It was colors of plates and cupcakes and things like that.

Joining us now from Dallas, Greg Knapp, radio talk show host on KLIF Radio. And the attorney for the school district, Richard Abernathy has declined to appear on "The Factor."

All right. So just today Dr. Doug Otto, the superintendent of Plano schools, has changed his policy. Why don't you tell us about that, Greg?

GREG KNAPP, DALLAS RADIO TALK SHOW HOST: Well, of course they'll claim they did not change the policy. I was able to talk with a lady from Plano schools today, and she said, "Greg, we've never banned the color red and green," and she just kept saying that. She had her talking points.

But as I pressed her, I said, "Well, what if a school says you can't bring red and green plates," and the parents bring them, and the school says no, would you side with the school or would you side with the parent?

And she said, "Well, we have to side with our school."

I said, "Well, then that's obeying."

So they're trying to do this little wiggle thing, get around what they've really been doing.

O'REILLY: Clearly nervous.

KNAPP: Bill, talking to the parents today — let me tell you one other real quick thing. Because I talked to a couple of these parents today, and every time I talk this on the show on KLIF they call me and tell me, "Greg, it's still happening."

But a couple years ago they were going so far as to tell this parent that I talked to today, "You can bring reindeer cookies for the party but you cannot put a red nose on that reindeer." That's how crazy it is. This year it's...

O'REILLY: Look, I'm here in New York. I don't know what they're doing in Plano. I used to live in Richardson right down the road from Plano, but I don't know what they're doing. Do you believe all this crazy stuff?

KNAPP: Well, Bill, it's not — it's not the whole Plano school system. And let's be clear on this, because this is a part the Plano school system is correct on.

Because I also have parents that call me, and I talked to another one today, say, "Greg, my school's fine." So, what it is is that the principals, the teachers, and even the parent associations set their own policies for these parties, and that's where you're getting these letters home.

There was one sent home to the guy I talked to today, his kid, that said white plates only. That's coming from this parent group that sets up the parties.

O'REILLY: OK.

KNAPP: Then if a parent complains and it goes to the PISD, the school board, then you get this whole other thing going on. Some of the schools are fine, some aren't.

O'REILLY: Let's let the lawsuit play out in court and then we'll find out what happened. But you're on the radio. People from Plano call you. Correct?

KNAPP: Absolutely.

O'REILLY: OK.

KNAPP: It's one of our biggest listenership areas.

O'REILLY: Is there or was there an anti-Christmas bias in any of the schools up there, as far as you could tell?

KNAPP: Absolutely. Thomas Elementary School is the one that the lawsuit's about. And that absolutely has been going on. They have admitted they had that problem, as you mentioned with the pencils, and the court did litigate that. And they have come out with a new policy where they allow the children now to give gifts to each other, even with a religious message, child to child, not teacher to child. They do now allow that.

But even today I talked with a parent who said, "Greg, please don't use my name, because I don't want to get in trouble with the school and have my kid in trouble." But they were told by this parent association no Christmas-related items allowed at the winter party.

Now that's in — that's in absolutely contradiction to the policy that was put out today by the PISD. That's what's happening at the school.

O'REILLY: How big a deal is it — the paper, the Dallas Morning News, our pals, they're, you know, calling me the usual. They don't like me. Fine. But how big a deal is this in Texas? Is this big or what?

KNAPP: Oh, it's huge. Bill, it's absolutely huge. You mentioned Richardson School District. Just a week and a half ago, a first-grade music teacher, part-time, told 6-year-olds, first-graders, there's no such thing as Santa and argued with a kid about whether there were elves or Santa Clauses or not. And she had to apologize because the parents were in an uproar and the school tried not to make it not a big deal. It's absolutely going on, Bill.

O'REILLY: You know, it's amazing because that's not a liberal, crazy area.

KNAPP: No.

O'REILLY: We're not talking about Berkeley, California, or even Austin, Texas. It's a fairly conservative area. Greg, thanks very much. We appreciate it.

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