Hi Simon,
anyone can use dotLRN, not only participants of the voluntary community. And they don't have to contribute in any way.
dotLRN is a software that is driven by a community of people who want to use it for various reasons. If one of the reasons (and I strongly second Al on that one) is widespread use by people who cannot afford to pay for a sophisticated commercial package, then noone should stop them or question their ways.
It is Al's and other volunteers time that will be used for the grants. There is a governance board for dotLRN in place that could give backing for officially endorsed dotLRN grants.
If you don't feel comfortable with the possibility that people use the toolkit and get support for applying it without their need to submit something back to the core, then I begin to wonder why you feel comfortable with OpenSource development in general as I see a contradiction there.
And last but not least, if grants come, someone needs to install the software for these institutions, train the people and adopt dotLRN to their needs. Not to speak of additional functions they might need (that could make it back into the core). As I doubt many universities would be capable of doing this completely on their own, we have opportunities for the parties involved in the community to make some money.
So, yes, we should pass the hard work/effort of the community to others with subsidy. But maybe I'm only in favour of it because it is our company policy anyway.
As a sidenote on postgres. Unless Oracle is willing to part with licenses as part of the grant, postgres will be the way to go anyway. Furthermore it will be easier to get grants for an Open Source solution front to back.
One more. Offering dotLRN is only part of the bargain. To bridge the digital divide, we also need to make sure, these universities / schools have Internet access and computers to access it. Therefore it would make sense to also ask for old i486 computers that are not beeing used anymore within companies and ship them to the grantees instead of throwing them away.
And if you want to take it even further, you could partner with a volunteer organization to train volunteers for one month in bootcamps (with the training paid out of grants or provided for free, remember ArsDigita ?!?) and then send them to the university for a three to five months internship (e.g. paid by the grants or the university itself) to train and adopt the solution.