Tim, I've been a semi-pro for a couple years, and still have that question of myself.
My answer is: is it going to help me get more business? If the answer is yes, then sure I'll let them use the shots. I just spent a couple hours this past weekend at a charity dodgeball tournament. I shot several hunderd shots in the hour I was there, spent a couple hours editing, then pretty much gave them (watermarked copies) to the event sponsor by way of taging them on Facebook.
You have to remember, that under federal copyright law, you as the photographer hold all rights to the images. The only time this changes is if your are employed by a company and you take pictures on their time, then they hold the rights at the company.
Even better question is "How exactly is this going to help me get more business?". and answer is not, it's going to get me more traffic on my website. that's just going to help you pay a bigger hosting bill. if you can imagine clients who are going to book you from that referral and how are they going to do it, than by all means give them the pics... otherwise, you're running a business, not a charity
In addition to being a photographer I am also a hockey coach. My wife, also a photographer, takes a lot of hockey pictures (since I drag her to my games) she always posts our games for our parents to download for free. We get a good amount of purchases by the other teams parents and players and their friends. And we get a good deal of word-of-mouth referrals. So, yes, it is ok to give the school their images you should be able to leverage that good will to your advantage.
Whatever you decide to do, it would be a good idea to think about your ROI.
When I face this, I think about if they are going to make money on the image. Hands down, if they make money on the image, I need to too.
If not, than what would you like to have in return? Ask for it. On a community website in my area I got free advertising space, as well as a free booth in the local community annual festival that they usually charge $100 for.
Don't just give it away for free, your work is worth something.
I photographed an event a couple a weeks ago. The agreement between me and the person I shooting for was that I would own all the rights. Now third parties are asking to use some of my pictures on their website. One such is a high school that had some students at the event I photographed. This high school is asking for me to share 3 photos with them, in return they will put my URL on their site were the pictures will be visible. I want to sell my pictures and think if they want them, they can buy them. However, I don't want people upset with me and would like to stay on good terms. Ideas?