It's very clear that it wasn't a sexual striptease, but that he was just joking around. As it says in the article, the kids were all goofing off and so, to get their attention, he joked that he would subject them all to his man-boobs if they didn't straighten up. All the kids were laughing and thought it was really funny when he followed through. It's no different than anything those kids could see on TV or walking down the street any day, as guys go around without shirts on all the time (and he only took his shirt off), so it's not like it scarred them for life.
So, given all that, while he should have known that some people would not appreciate his idea of a joke and method of getting the class to behave, the punishment seems extremely harsh. I agree that something should have been done, but banning him from teaching in the entire area of 300+ schools? That's a bit much. A tongue-lashing and required verbal apology would have sufficed.