moorezilla's right, with WPMU, there is no way around having students sign up at least as users without a blog. They need to be in the database (wp_user and wp_usermeta) for zillions of reasons. They are going to have a profile page to edit their own password anyway, the inconvenience of having another login/password to remember is short lived.
Have students signup as normal site users(disable "Gimme a Blog"), create the blogs for teachers in SiteAdmin-->Blogs. Teachers then go to their Dashboard and Add Users from Community one at a time using students' known email address. Once users are added they can be made any role of the teacher's blog in a couple clicks.
Teachers control who, and what capability edits/reads their blog. Couldn't take more than a few minutes for a class of 30 to be ready to go.