If you aren't already, you might start including a capsize drill at the very beginning of the class. Capsizing is pretty much an unavoidable part of dinghy sailing, so if the kids are so spooked by a capsize that they quit, perhaps disarming some of the trauma and stigma that goes with capsizing will help that.
As for the weighted daggerboard, when I owned a Daysailer, I heard of some pretty jerry-rigged contraptions to add some stability, so it's certainly on people's minds. Everything from casting the centerboard of lead to drilling a hole near the tip and lashing dumbell weights to it. There's a real limit to how much weight you're going to be able add to a relatively thin foil like that. I think a detachable bulb may be the best bet, as BH posited. Something like a beefy solid metal rod, ripped in half length-wise, with through-holes that match up with holes in the board. Simple as two bolts to attach it, and it comes nearly flush so it can still be beached; it just leans more to one side than previously.