You are talking about high school here? This isn't a College prep course for the "real world". They aren't going to get a job at a high paying graphic design firm right out of 12th grade! Come on! Just use what you have and if you want to introduce the free tools as well - go ahead. PhotoShop is a highly specialized tool used by professionals IN THE FEILD. If they want to learn PhotoShop they should have to take a corporate course or graphic design college.
Besides that fact, Whether you do get PhotoShop CS3 or not, in 4 years when they start looking for a job it will be obsolete anyway. The only difference between PhotoShop 7 and CS2 is a couple more features to convert it to bloatware and THAT'S IT! Say thank you that you even have those older programs. Students in Africa and Asia struggle to find a computer running Windows 95!!!