They aren't allowed to travel or perform with the marching band in any way.
Think of it this way. If they failed because of a heart or breathing issue that would be made worse by heat, why would you then put them in a hot environment with a uniform on?
The kid has the option of retaking a physical at a later time, or correcting the issue that caused them to fail. According to a medical professional, participation in marching band may be detrimental to the student's continued health.