Obviously, both female participation and female representation are important.
Female participation is more immediately important, because you're dealing with your actual students, and it's crucial that the girls be able to participate just as much as the boys. That being said, this isn't a one-or-the-other case - quite the opposite, since the easiest way of letting the girls participate is to have roles for them.
Gender Balance IS An Issue
Others in the group argued that it was the actors gender that matter and that raising the question about the characters gender was a step back for gender equality since we would make gender an issue.
This is an ongoing argument, and this isn't the place to rule definitively one way or another - but this point needs some attention. Gender representation is very much an ongoing issue, and many people care about it deeply. It is disingenuous to claim that since some people don't see a problem, then the people who do should be disregarded.
In theater, it is still the case that there are fewer and more limited roles for women than for men. In popular media in general, women are often portrayed with less richness and variety than men are. There is a common perception that the "default" character is male, and women are a specific exception - less common, and almost always placed in one of a few stereotypical roles. Many people see this as extremely problematic.
The Bechdel Test captures this disparity by pointing out how rare it is to see a portrayal of two women having a discussion concerning their interests, not centered around men. The interest here is not in whether one specific movie, story, or play "passes" or "fails" the test - a piece can be terrific and even feminist without "passing" the Bechdel Test, and a piece can "pass" and still be overwhelmingly mysoginistic. The value is in the aggregate - the realization that these seemingly trivial requirements are very rarely met. And to a large extent, this happens because many, many creators make the choice to go with their "default" preferences without examining them for gender balance, and because those "default" preferences happen to marginalize women (because that's kinda what we're used to). That is exactly the situation you're describing here - your group defaulted to a male-centric show, and some actively object to straying from that default. It's not wrong, but when everybody does that, the result is problematic.
...but is it your issue?
All that being said, the fact that some people favor proactive gender-balancing doesn't mean that your school and your play are necessarily obligated to that battle. If, in general, all the individual participants are cool with the show you're planning, then you're no more obligated to champion gender balance in your production than you are to take a firm stance on the Middle East. If your choice is between a terrific show that everybody's happy with, but happens to be male-centric, and a desperate search for something more "politically correct" - the first choice is perfectly legitimate. Again, there's nothing wrong with portraying male characters - the problem is the lack of portrayal of female characters. You could even commit to doing a female-centric show next year - that'd be a different type of balance.
In my mind, the two primary points are these:
- This is a student production. The students should enjoy it. Both the boys and the girls - which means, at very least, the girls shouldn't be barred from getting good roles just because they're female. It also implies that if you feel many actresses would be uncomfortable playing men, than that might be a good reason to avoid this kind of play. (In my experience in community theater, some are fine with it, some aren't. A lot of girls feel like they're being cast in a role that "wasn't meant for them," which can feel a little second-rate. On the other hand, some really enjoy having a wider scope of casting opportunities and more varied roles to play. Often the same actress will appreciate both points.)
- Lack of gender balance in the play's characters is a legitimate criticism. This is a real issue and many people care deeply about it. It is wrong to dismiss the criticism as irrelevant or incorrect - it is legitimate, and worth taking into account. That being said, it's one point of criticism among many - there's no reason to give it veto power unless it's that important to the actual participants. "This play doesn't have major female characters" is no more nor less a problem than "This play is too long," "This play is out of our budget," "This play plays mental illness for laughs," "This play is too hard for our actors," etc. etc. It's a perfectly valid concern; presumably, every option you're looking at has valid concerns. Take it under consideration, weigh it fairly against other issues on hand, and do what you can to address the concern. No more, no less.
Since at the moment you're still at the very beginning of planning and writing, and since the topic has obviously come up as significant for at least some participants, I think it would be appropriate to devote a little bit of effort to come up with alternate proposals that don't have the gender-balance problem. Since this isn't an either/or decision, and it's perfectly possible to find a play that has female actresses and characters, I would look for that first. At very least, you'll have options to compare instead of one proposal to approve or reject.