We just did a shoot for our son's preschool graduation, all the kids in cap/gown. Ended up doing a TON of PP on the pics since originally we were just there shooting candids for a slideshow, we had no backdrop, no extra flash, no reflector (outdoor photos at 12 noon in Vegas).
I think the quality is not an issue, the issue is how much would a parent be willing to pay?
Our package was 1 8x10, 2 5x7 and 4 wallets for $25, or double for $40. If you buy the package you can a-la-carte extra prints. Our cost for printing this was $6 from CPQ, so we made $19/order. It was $9 shipping ($1/package sold).
Here's a sample of the photos, I think not too bad for not having ANY pre-planning for a "formal portrait" - clarity problems are due to resizing by Gallery.
There were 14 kids, we sold 7 packages. So half of them bought. More would have bought if the school had promoted it better. $18/package profit, 7 packages earned us a whopping $126 for about 3 hours work (all inclusive, shooting, PP, ordering, delivering, etc.). We were there shooting for "fun" anyway so we considered it a bonus.
This school is a part of a "Community School" network and the director has asked us to do 8 schools for 3 different events per year... Christmas, Easter, and Graduation. Schools average 15-20 kids and if we do this we'll do much better in promotion. We may raise the price a little bit, too.
We don't kick-back to the school but we do provide them with an 11x17 class photo with the teacher on it, and while we're at the event we will spend 1/2 hour on candid shots for their use.
But, $200-250 profit per school times 8 schools is $1600-2000 for 30 hours of work (for us, that's about 1/2 of a week hours-wise). Not too shabby.
So, after this long post I'd say $20-25 for that package is reasonable.
You aren't going to get rich, but there's a limit as to what you can charge for "School pictures"....