On one hand it's very obvious to me that things like this need to cause a reaction, on the other hand it seems insane to handcuff a _child_ and put him in a cell for something like this.
Seems to me like this would be more of a job for a medical professional or child services. But I'm still very unsure what the correct action to take would be.
Of course, I think most of us when we were kids might have occasionally joked about killing the teacher. Hell, at my school we had songs about killing the teacher. (Ooh, the internet wins again: http://www.citizenofthemonth.com/2005/08/04/a-tribute-to-tea...). Of course if this kid is really fantasising about killing the teacher (especially at age eleven) then he's probably a bit disturbed, so it's time to have a meeting with the counsellor and the parents.
I really can't see any circumstances under which getting the police involved is anything other than a waste of police time, though, unless he actually has a gun.