It's as misguided as most of the IT departments I've had to deal with blocking browsers other than IE because they are "insecure". No the other browser are not insecure, they just haven't bothered getting up to speed on the security profile of those browsers and confuse getting regular security bulletins about IE to be the same as being "secure".
How the IT department didn't know what its students, faculty and staff were doing is kind of hard to believe. For students and teachers in particular, Google Docs is a big deal. It's not just because it's a cloud version of Office, but rather that it has things that Office can't do that are especially important in a university setting.
As they point out, connections to Google Docs are encrypted. There's no way for them to tell what is and isn't legitimate traffic.
Lack of knowledge is not an excuse.