If the kids continue in religious education they will eventually ask the parents why they do not go to mass...because it is an obligation. This is what got my neighbor back to mass each Sunday. Maybe an exception rather than the rule. This priest will accomplish nothing. Kids won't get sacraments. Parents will get mad and change parishes or leave the church. People who don't understand Catholicism will have one more anecdote about the irrelevance of the church. I fail to see anything good that this will accomplish.
Surely, this priest has offended families who will be lost to the Church for a good long time, if they weren't lost already. However, future families will understand that they need to attend Mass for their children to receive the sacraments and that will almost certainly bring people back into the fold.
By the way, there are parishes by me that require parishioners to use their envelopes or they will be forced to pay out of parish tuition for their children at the school.
Everyone makes choices. The parents choose not to practice their faith. There are consequences for everybody. If it's addressed now, they have the opportunity to do what's right. By robbing their children of a life in the faith, they do them no favors by creating a charade out of Hiloy Communion.
Remember, God is merciful. He will equip these children with everything it takes to make the decision for themselves if the parents choose not to. The weight of this rests on the parents, not the priest.