I am the executive director of a new childrens theater company. our first production is rapidly approaching...it is a new version of snow white and the seven dwarfs, published by Pioneer drama service. The script itself is VERY dry and very cheesy! Our production team was brainstorming ways to make it more appealing and more of a parody on fairy tales, rather than taking it seriously. So, we had an idea of making the castle set in different eras- old west, 70's disco, etc. and this would also mean changing a few lines to make it humorous. Is this changing of the script illegal in any way...licensing laws or anything? Or, if its not, would this be considered highly unethical? This is my first time working in this situation, so your input would be much appreciated!! thank you!

Don't ask the question if you don't want to hear the answer

John is  correct! Read your contract carefully & check out what you can do & can not!
It is general a given that all the black bits (text) in a script belong to the author & the white bits are your domain. The exception to that, is in the warm props stage movement directions, which can be changed depending on your space & so long as it is not mandatory as stated in the script &/or contract, which is a rarity & generally only refers & is pertaining to the action of the plot, where any changes would effect the scripts story line/genre drastically to that originally written by the author.
With Snowy & the 7 D?s you would only be licensed to perform that of the writer of the this script that was adapted from the original story which would be out of copyright. Have you thought of writing your own adaptation by turning into a Pantomime & it becomes your own copyright & you won?t have to worry about licences other than the songs or music used that are usually covered by just a small blanket fee arrangement with your national copyright association.
Download a script for your perusal from http://www.funscripts.com/ & checkout the wonderful world of "He?s behind you!" in ?PANTO? & all it?s traditions, where the Principal boy is a girl & the Dame or Fairy God Mother is really a bloke in drag & heaps of past on traditions.
While the  scripts are very Pohmy (British) in location & idiom. It will give an idea how to cultivate something local & start your traditions!

Why choose to do a play that is "dry" and "cheesy" and needs to be changed to make it what you want.  If you don't love the play, don't do it.  Choose something else.