Hope that helps.
As far as I know it is illegal unless permission has been granted by the rights owner. Some of the teachers may be thinking that you can make 'personal' copies under 'fair use' provisions, but this is a very narrow condition and I very much doubt copies on a school server would be covered. However, I'd stress that it it depends on what the rights owner has stated they will allow.
There is a big legal debate about digital file sharing (eg. it is technically illegal in most cases to put copies of mp3's onto your iPod, as you normally need to save them on your Mac/PC first), but changes are probably a while away.
The school should check license conditions and should consult a professional legal adviser - Becta isn't able to provide advice on these sorts of issues and any information we provide them should not be taken to be legal advice.