a similar saga happened at my school. what it ended up comming down to was that students were effectivly getting two picks at the cherry. what i mean is that they basically got it marked, then changed it and submitted it for the final submission. The thing that made this a problem was that because we had 3 chem classes, with 3 diferent teachers, one of the teachers refused to do this because he thought it would be unfair to everyone else, however the other teachers allowed this to some extent (i don't think they actually marked it though). This just showed poor collaboration of the teachers and poor leadership by the head teacher/coordinator.
At the end of the day, the school is allowed to make up its own policies on the matter, and even though you may not think they are fair there is not to much you can do about it.
Although personally I think that any teacher should be allowed to read though and make suggestions, but I don't think they should pre-mark it. But this leaves another problem that if each question is marked independently, what one teacher things would be correct, another may not, so then whoever got their work checked by the marking teacher may have an advantage.