Its hard to tell if what was written was the exact way things went down, but if the reported course of events was accurate, they really had 2 sensible options:
1. Continue the game without spectators; inform both coaches that their teams are not excused from completing the game. This action should only be taken on 2 conditions:
a) the officials do not feel a continuation would endanger the players (without the crowd there, it usually won't) and b) we have a "Come to Jesus" meeting with the players that includes a well worded speech from the R about this behavior not being tolerable. I've found that if you can isolate the coaches together beforehand, tell them what you are going to say to the players and let them know that much of your intent is to keep their minds focused on playing basketball rather than following through on all threats, you'll be in better shape. If the coaches aren't cooperative, you go to:
2. SUSPEND the game and let administrators decide. This should ALWAYS be done when there's a question of anyone's safety -- including that of the officials -- if the game is at risk. I can't fathom anyone getting in trouble for suspending a game, even if it is being too cautious, as long as there was an event like a fight or an assault that reasonably put someone's safety at risk.
I'm not calling anyone at the game site. I, as an R, was put in the position to make tough decisions and I will make them. If it causes heart-ache later, so be it. As long as you behave reasonably, there isn't much anyone can do.