Nobody else picked up on this?
Dude, your buddy needs to seriously do the rest of our society a favor and PLEASE press charges specifically so this cannot happen. This woman does not need to be a teacher. The sad state of, well, our state is that they will in fact give her a job even if she is loony tunes simply due to the shortage.
Here's the deal. Your buddy is going to get paid either way.
No charges = they pay out.
Charges = there will still be a civil suit and, guess what, they (well, technically she, but inevitably they will pay anyway. Plus you now have the bonus of teaching her an important lesson and not letting this "enabling" madness continue, and potentially keep a nutjob away from our future kids.
Only reason I can see to take the "silence money" is if they offer a hell of a lot more than just "a quote".