Dear Ruth -
What a wonderful idea for a scholarship to be established in memory of the keyboard player. I'm sure you'll receive some great advice from Forum readers and will come up with your own good ideas. You'll have fun coordinating this process and are sure to have satisfaction when you see it come to fruition. Just some very general advice from my own experiences: (1) everyone is really really busy these days and (2) one person "CAN" make a difference! This time - YOUR number has come up to do it!
In a "BLINK MOMENT" - I don't agree with the owner of the music store to spend the memorial fund on children ages 5-7. Although I certainly agree and encourage kids to start music at an early age (actually, I'm doing "volunteer work" now in teaching piano to 4 of my friend's very young children). At this age, "Aunt Marsha" is more like a buddy and making music fun and like a game - getting them interested and seeing how positively music is affecting their lives.
Personally, the memorial fund seems more like a VERY special and treasured gift - and I would feel it be best directed toward a young adult - expecting to pursue a career in music - probably much like the person who died. Someone who has already practiced and worked hard at the keyboard for many years and is hoping for a chance at college.
Since you had no luck with public schools, what about some of the private high school performing arts schools in your area? Or, perhaps the family has roots in another country - in Europe or a 3rd world country - where so many musicians excel and work very hard but have very little money? What about coordinating a benefit concert at a local church - hiring a musician or 2 to kick off the event of the scholarship fund and trying to raise money to continue this gift - perhaps leading to an annual chamber music concert at the church.
If it were me coordinating this gift, I would try to figure out some way that this money will be "on going" so that the spirit of the dearly departed (I wish I knew his name) will forever be present.
Before my best friend died some 15 years ago, she requested that on her tombstone it be inscribed, "...and there shall be music where ever she goes." This is just something to think about.
Please remember - these are only MY ideas and feelings that I've come up with in the few minutes that I'm thinking about this. I'm sure there will be readers who disagree. But, ANY gift is just that - a "GIFT." And really and truly, a gift should be given with no strings attached. So, whatever you decide - it is sure to be wonderful!