Working with children check doesn't include a police check. It's a bit crazy but true. A 5 second google search would have uncovered it, but HR departments are like any beaucracy and can miss things.Not sure how she passed the working with children check, and not trying to downplay what she did. She's obviously got issues, but she hasn't shown a propensity to hurt children, that we know of. Possible she has/had mental health issues, problems with drugs, postnatal depression.
As bad as it looks for the club, there's no evidence that she's a risk to the kids working on the banners or anything.
The right thing for the club to do would be to check how the other volunteers feel about her staying on and act accordingly.