I agree. This priest doesn't get it. The kids should stay in the classess. This is where they learn about the obligation to attend mass. I am not making excuses for the parents, but to penalize the children and to prevent them from religious education just doesn't make sense.
We had a priest near us that would not verify parish membership for admission to Catholic Schools unless the parents were contributing large amounts of money. He actually sent out letters telling the parents that they have no business paying for their kids to go to Catholic school if they do not contribute enough. People just changed to another parish.
All parishes subsidize the schools to some extent from the offering basket. (My parish subsidizes over 50% of the tuition cost.) If parents refuse their obligation to contribute within their means to the needs of the Church, and this is an obligation as binding on pain of mortal sin as the obligation to attend Mass weekly, their children do not deserve the privilege of a Catholic education. Why should the rest of the parish shoulder the burden for slackers? "Do not give the dogs what is holy, nor cast your pearls before swine." (St. Matthew 7.6)