Small Gods was actually the first one I read all the way through, too, but it didn't really grab me like the witch books did. (There was no Tiffany Aching back then, sad to say.) I also really enjoyed the Guards books, and I had a friend who loved Moving Pictures as a jumping-off point.

She can start anywhere she likes, but I'd strongly recommend against starting with The Light Fantastic (I read the first two chapters or so in high school, and abandoned it because it made no sense). It was much later that I learned that it was the second book in a two-part novel, and also that the later Discworld books were more developed and better.

It does seem crazy to tell kids they can't read books they brought from home, and doubly so if they are books that are in the school library.