For your space, I'd stick to the park flyer category. Bigger planes need a bit more room. I've listed some links to planes that may fit your needs.
The Great Planes Tutor--I've flown the stick version (BLT) and found it was a good step up from a very basic RC Trainer. The mini Telemaster is also, from what I've heard, a good trainer. I followed a thread for the MiniSport from someone who quite enjoyed it; it may not be the best to learn on, but students can always build them and fly them once they've gained experience.
http://www.greathobbies.com/products...od_id=GPMA0002
http://www.greathobbies.com/products...rod_id=HLIA101
http://www.greathobbies.com/products...rod_id=HRRK304
Something else to consider is an intermediate build, like the GWS Estarter which is a great 4 channel trainer. It wouldn't take 40 hours (but then, maybe!), but you can go through the Ultimate Estarter Threads, do some of the modifications, then finish it by filling in the surface of the foam and covering it with low-heat shrink film. If you power the stock setup with a light battery, it should fly okay, although if get the version without the power system and put in a cheap brushless motor it will fly much better.
It all depends on what you want and what kind of abuse the kids will put the plane through. If it's going to get abused, I'd be thinking forget nice and make it servicable.
It generally takes longer to repair a crashed balsa plane than a foam parkflyer.