If this were a public school, then I'd say, yeah there would be some serious legal issues.
But it isn't. Yeah it's crappy, but I'd bet that in the contract that is signed between you and the school, there is some sort of provision that you either have to abide by the policies of the Internal Board, or whatever. Or if it's a new contract signed every year, then they're basically saying "here are the terms, either you're agreeing to this by sending your kid here/signing the 2008-2009 contract, or you can find a different school." There may be an ethical issue here but I don't think there's a legal one.
Yeah, the school might be leaving itself open to liability issues by implementing this policy w/o doing background checks of the parents but again, you kid isn't being forced to go to the school either if you feel that uncomfortable with it.
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And they say back then our universe
Was a coal black egg
Until the god inside
Burst out and from its shattered shell
He made what became the world we know
~ Bjork (Cosmogony)
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