The Salvation Army is half right
I asked if these toys went to another charitable organizations but was told no, that by passing these toys on to another agency for distribution would be supporting these toys.
The Salvation Army is wrong to take issue with Harry Potter. It's false that sorcery of the sort the Salvation Army fears even exists, false that Harry Potter will get kids interested in sorcery, and false that it would be bad if they did. Thus there's no reason for the Salvation Army to refuse to distribute the toys.
However, given a belief that Harry Potter toys are bad for kids, the Salvation Army's decision to destroy them rather than let another charity distribute them is perfectly justified. Imagine someone donated a bunch of golliwog dolls to a toy drive I was running. I think it's pretty clear that those dolls are racist and I do not want to encourage any children to play with them. For me to pass them off to a less scrupulous charity to distribute would still be a violation of my anti-racist ethical principles. Though my own hands may be clean, racist dolls are still getting into the hands of children. And what I want (and feel obligated to pursue), as an opponent of racism, is for there to be less racism in the world, not for me personally to not be racist. Similarly, it's logical that what the Salvation Army wants (and feels obligated to pursue), as an opponent of sorcery, is for there to be less sorcery in the world, not for them personally to not be sorcery-supporters. The real problem is that they object to Harry Potter on anti-sorcery grounds in the first place.
A lot of liberal-minded people find it very convenient to urge others to take a "clean hands" approach to morality. If you find birth control objectionable, refer the patient to a different pharmacist who will distribute it! If you find abortion objectionable, then don't have one! But a clean hands philosophy is disrespectful to the nature of the belief. It insists that people should selfishly pursue their own holiness rather than trying to make the world a better place. Rather than punting to procedure, sometimes we need to engage in the substance of people's beliefs.