I think the heart of the matter lies in whether or not any deception took place.

Setting the teacher's actual abilities aside, did they lie and say they had a degree when in fact they do not?

If they lied, it's still fraud, no matter what their quality of teaching is.

And if the school says they want a teacher with a degree, then they should get a teacher with a degree. If they miss out on a really good teacher that doesn't have a degree, then it's their loss.

I don't think the issue has anything to do with comparing teachers with degrees to teachers without degrees, it just seems it has to do with the morality of deceiving a school.