Rachael , I have exactly the same problem when it comes to teaching one of my kids about money. In our case, it's not the school, but the ski hill, a tiny two-lift community thing where all of the kids are free-range, and where you can load a card with money for your kid that they can use to buy french fries and AirHeads throughout the season. There's no way to indicate on the card how much money remains, and no real need to do the math. The first day Sam had his, he bought candy for his entire ski group.
On the other hand, my oldest daughter, who's three years younger than Sam, will always know exactly how much money is on her card. She won't spend more than she's supposed to on any meal. She certainly won't lose the thing. That makes me suspect that this reflects not just her grasp of abstract concepts, but her innate way of looking at the world. Lily is 6, and she already equates money with power and independence. Sam is 9, and it's possible that he never will.
I think you're right to worry that the more abstract money is, the easier it is to spend, for our kids and for all of us. But it's not a new issue. It's always been tough to teach people to be responsible about money (look at Suze Orman). After all, even those concrete bills and quarters are only representative of the labor or trade value it takes to get them. It's all abstract.
Teaching kids about money comes back to the same question much of parenting comes down to: How often do you manage to let them take the hard knocks? As you said, that online pin system means your son can't lose his lunch money or have it taken by a bully. But to understand what that money means, I think kids have to lose it once in a while. (I'd draw the line at the bully, though.) I can remember losing or forgetting my milk or lunch money, and the result was invariably no milk or lunch. I think the answer is probably less complicated than we think it is: We have to give the kids money in whatever form and let them make actual mistakes with consequences. If Sam blows his card cash on rounds of Skittles for everyone in February, he should go lunch-less in March. He's not the problem, I am: I can't bail him out. If his sister chooses to, or his friends decide to repay all those Tootsie Pops in the form of a cheeseburger, that's a decent real world lesson. If they don't, that's an even better one. The trick is for me stand aside and let him learn.