"I believe that most RAs receive free room and board as compensation for services, but they are students who ultimately pay the schools to attend classes."
You're right. They are compensated for their work. That makes them employees.
My only comment was that the headline was misleading. There is no ban on Bible study in the dorms. There is a ban on RAs leading such Bible studies in the dorm they supervise. Makes some sense, I guess. I don't really care, frankly, but the headline was inaccurate.
If you are going to restrict what the RA's do behind closed doors in their own rooms by calling them employees, then they had better not be working on political campaigns, discussing religion on the phone with family members etc. Basically, anything that the president of the university couldn't do in a room full of reporters would be off limits.
I think the distinction you are missing is that being an RA is not a full time job, and I think most people would agree that what an RA does with other consenting adults, on his or her own time, in his own living room, should be no concern of the university.