While they obviously erred on the side of caution, I understand the reasoning here and don't think this is as outrageous as it first appears. Any word that has a realistic potential of causing a negative emotional response in a child can cause them to perform below their true ability, thus impacting their results and causing them to score lower than they would have. A little girl that just broke her legs would probably be distraught when remembering her new limitations after reading a test passage about dancing, for example, and a negative emotional state like that has been linked in a number of studies to poorer performance on standardized tests. They're simply going to these lengths here to ensure that the tests truly are fair and standardized for all students; I don't think there's anything wrong with that.
Want to hear how stupid it gets some time? A number of state standards call for students to learn probability so they can understand how to avoid unfair games of chance. But for some reason, you're not allowed to use games of chance while teaching students about probability, and in many cases, you can't even reference dice or playing cards.
Oh yes! I remember how much fun we had with our number cubes (which
totally weren't dice) in middle school math!