A suitcase clock isn't a simple digital clock. The teacher made the right move in getting it checked out. No reason to take chances if you any doubt to what it actually is.
I agree that it was fine to be suspicious and get it checked out. But as soon as they found no detonator, no explosives, or even any circuitry that wasn't necessary for clock operation, they should have let the kid go. There was no reason to handcuff the kid either, unless it looked like he was resisting being escorted out of school by the police. And when he was being questioned by police, he should have been allowed to talk to his parents, and / or have a parent present during questioning (he's a minor child, after all). I'm also upset with his engineering teacher (the one that he had originally shown the clock to) in that the teacher didn't come to his defense by saying that Ahmed had already shown him the device, and that the device was nothing more than a clock (perhaps the English teacher wouldn't have been able to distinguish the differences between a clock and a bomb, but the engineering teacher should have easily been able to do so). Finally, once the device was found to be a clock and all of his responses to questioning by police and school staff corroborated this (that he had built the clock to show off to his teacher, and that he wasn't trying to make a hoax bomb), the school should have not punished him any further; the police were able to drop their charges, so the school should have done the same.
Had the story been that a kid brought the clock into school, the clock was confiscated by a teacher as being a suspicious device, Ahmed gets questioned, but then at the end of the day he was cleared of all charges, had his clock returned to him, and had no further punishment, I don't think there'd be such an outcry over the injustice of it all. So while I agree that it was fine for the school to check out the device and to question Ahmed about it, it is the aftermath of the situation (esp. being questioned by police without a parent or attorney present, as well as the continued suspension of him even after the investigation showed nothing wrong had happened) that I have a big problem with.