This report describes a 2-day meeting of experts to identify and discuss the ramifications of inclusive school system proposals on the management, administration, delivery, and effectiveness of education programs and services for children with disabilities and to initiate development of a national action plan to address the issues. The policy forum included state and local special and general education administrators, university researchers, policy analysts, and parents as well as staff from the Office of Special Education Programs and the National Association of State Directors of Special Education's Project FORUM. Preparation for the meeting and the process of the meeting are briefly summarized. The meeting resulted in the identification of four challenges seen as critical to the realization of reform to improve educational outcomes for all students. They are: (1) realignment of special education and regular education orientations and philosophies to embrace the diversity of student abilities, backgrounds, and needs; (2) funding structures that allow for the flexible utilization of resources to meet individual student needs; (3) examination of regulatory impediments to innovation without losing sight of the need to protect the educational rights of vulnerable individuals; and (4) implementation of effective instructional strategies and new approaches to preservice and inservice personnel preparation and deployment. Each of these challenges is discussed in terms of major obstacles and solution strategies. Attachments include a list of policy forum participants and a background paper by Eileen M. Ahearn titled "The Impact of Inclusive School Initiatives on the Education of Students with Disabilities," which contains 51 references. (DB)