It's illegal. The self Serve Kiosks have a message that you check saying you aren't copying copyrighted materials and that you have ownership of the photo.
Since a copy isn't tangible like a piece of jewelry or a car people have a hard time realizing that it is considered stealing by law.
IF you want to be on the up and up, why not read a little bit about photograpy online, take your own photos (you can get some good ones from an inexpensive camera) and share those. I bet you can get better photos of your kids than the school photographer in most cases. In this day of digital, work with quantity! Experiment and take a gazillion pics and chose the best one. Instead of a 5 x 7 print out 4x6s. You could take it a step furter and get a frame for a 4x6 or some Christmas cards hold 4x6 photos. A little more work but very rewarding and fun.
I spring for the CD now as I like to use the photos in photobooks and want it to be legal. Not a judgement if you don't, it's up to you what you are comfortable with doing.
I'm going to research the laws regarding old photos. I'm wondering if at some point they are considered "public domain" Magazine articles unless the copyright is renewed expire after a number of years...... I'll update for others if I find something useful. Otherwise if we did follow the laws as stated here, old photos could be lost for good if they aren't copied.
ETA: Found a promising source -
First off it explains almost all photos pre 1923 are public domain. Helps me but how does one prove this? HMMM. It also has links to this law and others. I won't post them all but if someone needs it looks like a good place to start.