I consider myself an Evangelical and my DH was in ministry for 20 years and now teaches theology. First, let me say I would not suggest or encourage this particular approach, but I have a perspective that might be helpful.
Firstly, I'd remember that the members of the participating church are neighbors and community members. It is always best, whether are neighbors are muslims, lesbians, or strict baptists, to assume the best of motives. To give a Bible and to pray for the young people in the town being launched into adulthood could be nothing more than their expression of care, even if many see it as heavy handed or culturally insensitive. I do not know the wording of the letter indicating that the students are being prayed for. I will say, however, that I regularly pray for non-Christians without asking their leave, but in clear respect of them as persons. If the letter carries taints of "we pray for you so you won't go to hell," well, that needs to be dealt with as uncivil speech.
Perhaps if community members could speak to representatives from the church first, letting them know how they feel in a straightforward, but irenic manner, a better understanding and a new way of honoring graduates could be found. Perhaps something as simple as asking the church to hand out their gift Bibles in another location, and to graciously allow them to be refused by students who don't want them.
As for separation of church and state, I defer to lawyers like you, Una! Of course, the establishment clause doesn't guarantee a public sphere absent of religious speech at all, although it shouldn't favor one faith over another. It is the school board and the Principal who are the first authorities in these events.
Finally, I would certainly not like finding a Koran or Buddhist text (just an
example, not a statement of any dislike) on my child's seat in the graduation hall. No one wants to feel like a "project" or "mark," whether they become the
target of a faith group or a political one. However, I do own a Koran, which I have read portions of, a Book of Mormon, and all kinds of books about world
religions (DH has an impressive library that cuts into my closet space!). I would encourage every household to own a Bible, too, and to actively engage and share their thoughts and experiences with others and listen as freely as
they speak. Living in diversity won't be served by groups claiming sole rights over public spaces and events, but it also won't be served by asking community members to check their worldviews and dearest beliefs at the
door, either.
Just my thoughts. I respect and accept other the views of others fully and warmly.