At our school all parents, teachers and paid staff of the school are automatically members fo the PTO. However, only parents are eligible to serve on the board (even if they are also paid staff).

I don't have a problem with parental staff members serving on the board or even if it is the entire board, so long as they are acting in the best interests of the PTO as a whole. This could be a difficulty balancing act given that all the board members are wearing many hats. And that they report to the Principal could also be a sore point (giving the P. more influence than was intended).

Regardless of who is on the board now, any eligible member should be allowed to run for office at the next election.

Also, Shawn is right, your bylaws should state how long someone is allowed to remain in the same position.

OK a PTO that does nothing but Staff comprises the Board?

Our terms (from most of the PTA/PTO's) Ive been in are 2 yrs long. Your bylaws should cover that

As for makeup of board mabe (agian check bylaws) Board ratio could be 51% Parents and 49% Staff (Our School site Councils and other school based management committees much be at least 51% parents) I couldnt see allowing only 1 staff board member- then it wouldnt really be a PTO

Although your doesnt sound like a PTO either- its the other extreme

Discuss with Principal and then his superiors if not handeld or responded to satisfactory

I know several comments have been made about this already - our PTO is ALL staff members. They are parents as well and have a right to be officers. BUT there aren't any officers that don't work at the school. Several parents have asked if they could run for Prez or VP but are told the officers that are in place aren't really doing anything anyway.
I would suggest only 1 staff member per year serving as an officer. What say you?