This week, Cardiff court dismissed the parents' application for a judicial review of Pembrokeshire council's decision to close Hermon primary. It ruled that the authority had not acted improperly. But parents will be meeting at the 53-pupil school on Saturday to discuss how to take their campaign forward.
Cris Tomos, who led the campaign, said: "We are obviously disappointed. We hoped it would be a lesson for our kids about how fair British justice is.
Instead, it just showed what the local authority can achieve with power and money. But we still want to look at other options. We believe in the future of Hermon and other rural schools."
At a school arts fair on Saturday, Mr Tomos plans to raise funds to run the school independently. He hopes to find several thousand donors, each willing to contribute pound;1 a week.
Pembrokeshire council intends to merge Hermon with two nearby village schools, transferring all pupils to a new, 180-pupil primary, two miles from Hermon. This will open in September 2005.
Since 1999, the Welsh Assembly government has approved the closure of 12 small schools. In Powys, Pennant and Llanrhaeadr, primaries are currently fighting closure orders. Hermon's case drew celebrity supporters, including singers Bryn Terfel and Cerys Matthews, and Rhys Ifans, who appeared in the film Notting Hill.
The case was brought in the name of five-year-old pupil Joel Lloyd. Joel's mother, Julie Lloyd, said: "Joel takes a long while to get used to people.
He needs one-to-one attention and I don't know if he'll get that in a bigger school.
"We moved here for a sense of community. Going to a large school will give children a town mentality, which they will bring back to the rural community."
But John Davies, leader of Pembrokeshire council, insists that the court's decision will benefit pupils.
"I hope that everyone can now move forward to improve the educational facilities and provision for children in the area," he said.
"I believe this has sent out a strong message that the council will always seize opportunities to improve the standard and quality of education."