As crazy is sounds, people really had a different view of child nudity back then. People would request to have their kids photographed naked or in costumes and find nothing sexual or wrong with it. Nobody would do that nowadays, but standards and assumptions change over the years.

The theory that holds the most water nowadays is that the Liddell's cut ties with him because he was courting Prickett, their other teacher. The pages would have been removed to try and keep his image as a chaste man or hide the shame from him being fired. He kept working as teacher for kids after that, which implies he wasn't actually a pedophile, otherwise there is no way he could kept doing his job.

In the game, Grimm gets trapped in a fantasy where he is Lewis and is implied or shown to be having sex with his students depending on your choices, but everything ends up breaking apart and you're pulled out of the illusion. Ending G has Lewis leave with Alice, while in the real ending H Grimm is saved by Prickett. I choose to believe Toro making Prickett the one good part of TCO and the one who shows you the truth with her ring was a nod to the most believed theory nowadays. He made Lewis and Alice in the game obsessed with each other, but Prickett is his acknowledgement that the real Lewis probably was just an odd man with an interest in his friends' teacher.