A controversial custody battle involving parents who are accused of teaching their children racist beliefs resumed Tuesday in a Winnipeg courtroom.

The children's mother was in court for the first time as an observer while a group supporting her bid to regain custody had planned a rally outside the courthouse.

The mother sent her daughter, now eight, to school with a swastika on her arm in March 2008. The teacher scrubbed it off, but the mother helped her daughter draw it on her arm again when she came home from school.

Child and family services case workers went to the family's apartment, where they found neo-Nazi symbols and flags. They took custody of the couple's daughter and two-year-old son.

Giving evidence Tuesday was the daughter's former teacher. She described the girl as a good student, a good leader in the class, who was making good progress. The teacher also said up to two thirds of the class were visible minorities and the girl had no problem interacting with them. She said there were never any behavioural problems.

The teacher also described a parent-teacher meeting with the mother, who arrived 45 minutes late, explaining she had stopped for a beer. The teacher made a note saying the mom was aggressive and defensive, smelled of alcohol and spent the whole time talking about herself.

One of the province's key witnesses was a psychologist who made an assessment of the parents. He found it significant that both of them posted comments to various websites that promoted the white race. He told the court the parents' comments on those websites could be the "tip of the iceberg."

During the lunch break, the mother said her comments were taken out of context.

"There are a few things I said, there were a few things I could tell he edited, just by knowing I don't speak that way," she said.

The mother did not have a lawyer representing her but said she hoped she'll be able to defend herself and make a case for getting her children back.

The children's parents cannot be named to protect the identities of the children. The couple, who are in the midst of divorce proceedings, admit they attend white-pride rallies and meetings.

According to court documents, social workers believe the parents' conduct and associations put the children at risk of emotional harm.

The child-protection trial began May 25 with the father arguing, through his lawyer, that his rights to freedom of expression and religion have been violated.

The high-profile custody case has garnered national attention, triggering debate over whether children can be taken from their parents on the basis of suspected racism.

The Manitoba government lost a bid to ban the media from reporting on the case.