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Your situation sounds very similar to the one the arts people are facing at my school. Like your school, students participate in a 2 or so hour block time for reading. Some have it right away in the morning, and the rest have it a little later in the morning. This means that the specialists are unable to take the majority of classes during the morning. The few classes not in reading block at a particular time are few, leaving the specialists to scrounge to find classes that they can teach during this time all taking from the same small pool of available classes. Mornings, therefore, are not utilized to the maximum for arts specialists, leading the principal to conclude that we have too much open space. His inflexibility to change or modify the existing block schedules prevents us from changing this perceived problem.
As you said, the principals, being very academic focused, are failing to see the beneficial role that the arts play in enhancing that "core" curriculum.
Although I have hear of no studies specifically relating to block times vs. arts education, I would encourage you to read the Business Week article which emphasized the vital role that the arts play in students' education and life.