The debate over Title I setasides may be moot. One simple phrase in the stimulus law may allow districts to spend money from Title I and other federal programs as they choose, without following the rules set in NCLB or other laws. The clause says that states "may use the funds for any activity" authorized under the Elementary and Secondary Education Act and other federal laws. See Section 14003 in the law itself.
Creative lawyers are suggesting that because ESEA's Impact Aid program gives districts wide discretion in spending money under ESEA, districts may be able to rely on that program to justify spending money on just about anything they choose. They've asked the U.S. Department of Education for guidance on this and expect answers soon.
In a broader post on the stimulus, Eduwonk calls this issue a "big deal."