Janice,
I believe faith schools are allowed to restrict first preference to LAC/FLAC of the faith, as long as LAC/FLAC who are not of the faith come before any other not-of-the-faith children. Eg. LAC catholic, other catholic children (with whichever tie breaks they choose), all other LAC, any other categories.
They are equally allowed to widen the first category to include all LAC/FLAC children. And IMO it is not particularly Christian to choose to e.g. give random catholic children preference over a LAC who happens not to be Catholic. I could maybe just barely understand if this would concern masses of children - catholic schools have the explicit aim to provide catholic children the chance at a catholic education. If most catholic children couldn't get into the school due to all places being taken up by non-catholic LAC children, the school would not be serving its purpose. But in reality, there would be maybe one non-catholic LAC/FLAC applying to the school every 5 years or so. It really wouldn't hurt the schools, nor the communities, to show some Christian spirit.
Anyway my point is a different one, I am not entirely sure but I believe that whereas they are allowed to give LAC preference to LA Children of the faith only (rather than to all LAC), I believe they are NOT allowed to restrict that access by qualifying the 'faith' by something such as baptism or church attendance.
It wouldn't make sense either. In fact they were taken into care because their parents/birth parents didn't care for them adequately, and now the school admissions is to further 'punish' the children for their parents'/birth parents' actions?! If they were adopted into a catholic family, the adoption order may not yet be through at the time of school applications, hence the family couldn't have legally had them baptised yet. If the child is recently taken into care, you 'punish' the child for the parents' unstable lifestyle which included no church attendance. Etc.
So if you were to write to the OSA (please do!) then I'd focus on that 'qualifier' that restricts LAC preference to 'baptised' children. Which is definitely nonsensical, and AFAIK probably not legal. Whereas the restriction to 'catholic' children is, sadly, perfectly legal.