Is Released Time Legal?

Yes!  The constitutionality of Released Time was affirmed in the Supreme Court case of Zorach v.  Clauson (343 U.S. 306).  In the majority opinion,  Justice Douglas wrote:

We are a religious people whose institutions presuppose a Supreme Being.  We guarantee the freedom to worship as one chooses.  We make room for as wide a variety of beliefs and creeds as the spiritual needs of man deem necessary.  We sponsor an attitude on the part of government that shows no partiality to any one group and that lets each flourish according to the zeal of its adherents and the appeal of its dogma.  When the state encourages the religious instruction or cooperates with religious authorities by adjusting the schedule of public events to sectarian needs, it follows the best of our traditions. For it respects the nature of our people and accommodates the public service to their spiritual needs.  To hold that it may not would be to find in the Constitution a requirement that the government shows a callous indifference to religious groups. That would be preferring those who believe in no religion over those who do believe.

Released Time is legal in all 50 states.  Currently, 19 states have specific statutes in their educational codes that specify the circumstances under which Released Time classes may be conducted.  No state has a law prohibiting such a program. In states that do not have a specific law concerning Released Time (such as Oklahoma), local school boards may adopt a policy permitting such a program.

Schools have the discretion to dismiss students to off-premises religious instruction, provided that the schools do not encourage or discourage participation or penalize those who do not attend.  Schools may not allow religious instruction by outsiders on premises during the school day.

(From Religion in the Public Schools:  A Joint Statement on Current Law.  This document has 35 organizational signers, including The American Civil Liberties Union, The American Humanist Association, American Jewish Congress, American Muslim Council, Americans for Religious Liberty, Americans United for Separation of Church and State, The National Council of Churches, and People for the American Way).