As another theater educator, I have to back up dramamama here. It's wonderful that ALW is going to waive performance fees for a contemporary show. It's wonderful that schools are even allowed to license the show while it's playing on Broadway.
Do not confuse availability with feasibility. There are vocally taxing parts in School of Rock that already make it difficult to cast K-12 students in those roles. Add on the requirement that the instruments must be played by the very specific actors onstage and you're making a hard show to cast an even bigger challenge.
Music programs in school are not magical. You do not gain the ability to teach students how to proficiently play instruments not typically taught in orchestral/instrumental programs to be proficient on a Broadway musical score in the limited rehearsal period schools have to put on a production. Could children learn these parts in a two or three month period? Yes. Will they be able to balance eight hours of school, rehearsals for the play, and the necessary private music lessons to catch them up to speed to just take on the waived fees opportunity for School of Rock? Probably not. And the costs of paying for the extra staff and instruction time to get the students to that level easily outweighs the cost of licensing the show.
If you have students who can play these instruments and are right for these roles, then by all means, take advantage of the waived fees. Just be aware that the show is challenging without adding in the actors must play the assigned instruments requirement in the contract. The offer is generous for the comparatively small group of people who can take advantage of it.
In educational theater, it is common for actors to mime playing musical instruments onstage while the pit actually covers the part. You won't find too many productions of The Music Man with a working piano onstage for the music lesson/Goodnight, My Someone scene. Same with guitar playing Maria and Georg in Sound of Music. There is no restriction in those contracts to force you to cast actors who play piano or guitar in those roles, thus limiting the talent pool. School of Rock is a show about students learning to play music that could be performed much easier with students learning basic technique and faking the notes while the actual musicians play in the pit. Live musicians taking on the part will be better, but forcing the actors to play the instruments adds an extra burden on the production other shows do not require.
ALW has done wonderful things for arts education. That's not in question. Removing the licensing cost from the budget for schools doing School of Rock is generous. That's not in question, either. It's just how practical the offer is considering the restrictions on the material. And that's coming from another theater educator who looked into the specifics of mounting this show and realized it just wasn't feasible for the schools I work in because of the instrument restriction.