I agree with a lot of what Scott says.
You CAN however economize on the green screen part of this, using Home Depot fixtures and fluorescent tubes, just for lighting the green screen. 2-tube Lithonia shop lights are $20 at Home Depot. So a modest green screen for a 2-person news desk type set, or a one-person "weatherman stand-up" kind of set that's typical for a school studio, could be lit for roughly $100. That's for the backdrop only. You still need to light the talent. For the $900 you have left, I would shop around for bargains on used pro gear online. You can make your own softlights from halogen work lights, but these would be very crude and hard to control, and while they may allow you to get a program done, they wouldn't teach your kids much about how to light.
You're going to need at least a key and a fill for each person on the typical 2-man news/interview set. If you're clever, you can "cross-key" so that one guy's key is the other guy's fill, but this is a little advanced for beginners.
Look at finding used versions of these:
http://www.google.com/products/catalog?hl=en&biw=977&bih=656&q=lowel+lighting&um=1&ie=UTF-8&cid=188530897085830411&ei=PHPsTJaIPI6ynwePyJnoAQ&sa=X&oi=product_catalog_result&ct=result&resnum=6&ved=0CDQQ8wIwBQ#ps-sellers
or these:
http://www.lowel.com/llight/
which are very modest yet very flexible, and the PAR bulbs they use are very cheap at any hardware store. Add some tough-spun or tough frost diffusion sheets by Rosco (try markertek.com for small packs of this) and their light will be softened and more pleasing visually. You can use the flexible mounting hardware for the l-lights to hang them from a piece of overhead pipe and thus keep your set floor clear of lighting stands and etc.
That's the most "bang for under $1,000 bucks" I can suggest to you. If you have your mind set that you can't get more money and you have to have more lights than that, well, then it's back to Home Depot and some DIY fixture-building. You *could* make diffuse softboxes for keys out of those same Lithonia fixtures, but they will be really hard to control and aim unless you add barn doors and cutters.
Do an internet search for "graff lights" and you'll get some more tips on this kind of setup.
I will finish by saying that quality professional lighting instruments are your BEST video investment, because once you get them, you have them for life, and if you divide their working lifetime by the initial cost, it is pennies.