@Eric ******
None of that requires them to have your passport. As you said, you must be present in person to actually apply for and receive the visa.
The application to the ministry of education does not require the school to have your passport. My school took copies and then when they received the approval from the ministry, asked me to come in and pickup the paperwork to take to immigration and get my visa. The only time they ever had my passport was for 5 minutes while they made copies for their part of the paperwork.