As a software engineer I find Scala to be a very powerful tool, but one which takes some time to learn. I could see it being a useful teaching tool if they stay away from obscure corners of the language. I'm glad that they didn't go with Java, but I'd only go with Scala if the students are a sharp bunch. Python would also have been a suitable choice.
That School (Aalto University) has used Java as a first year language for quite some time. Then they switched to Python (I think), and then to Scala. Before Java, it was Scheme. Before Scheme, I don't know.
