Hello,
each user belonging to a group can read all files under a group's share. So I suggest you to create a group for each stundents+teachers by class and other for just class's teacher. Wit this setup the teachers may put document in either share (and of course they can put provate documents on his own user's share)
Regarding the password question, currently it is not possible because we have a problem with user's password coordination between the different services and changing the password like that would probably end with two different passwords for the same user.
Cheers,
Javier