The Education Secretary provoked universal outrage in the national newspapers after she cleared a man on the sex offenders' register to work in a Norwich school.
Her decision to allow Paul Reeve, arrested as part of the largest inquiry into child porno-graphy in the UK, to work at the Hewett school astonished teachers' unions, children's charities and social workers.
Ms Kelly admitted responsibility this week for the decision to allow Mr Reeve to teach. She also admitted that a "small number" of other sex offenders had been cleared to work as teachers or support staff in schools - despite being on an official police register. She has now commissioned an urgent inquiry to establish exactly how many offenders have been cleared and why.
The incident led to rumours that Ms Kelly could be a casualty in an expected reshuffle. But the Prime Minister's official spokesman confirmed Mr Blair wanted her to stay in her job to see through controversial education reforms.
The embarrassing headlines came just two days after Ms Kelly faced jeers from local authority representatives and teacher unions at the North of England Education conference in Gateshead.
She failed to win round doubters over the education white paper, which has already prompted a revolt among backbench Labour MPs and complaints that it will result in a return to selection on academic ability.
Ms Kelly's insistence that new schools should be at arm's length from local authorities provoked cries of "shame" and "why". Some delegates walked out of the conference last week. The fresh round of dissent came as she launched a "prospectus" for trust schools.
The prospectus attempts to re-brand trust schools as local authority maintained, rather than as independent state schools described in the recent government white paper, because they will receive their funding through councils.
Some delegates shook their heads in disbelief as she answered questions after a long speech that argued trust schools were a "leap forward to greater collaboration".
Afterwards, Patrick Scott, director of children's services at York council, said: "I thought she was deeply disappointing. I hoped her speech might bridge the yawning gap between the rhetoric and reality on the white paper and all we got was the same empty soundbites.
The white paper, published in October, proposed more freedom for schools to run their own affairs and a bigger role for parents and the private sector in state education. Every school in England will have the chance to become a non-fee-paying trust school backed by business, universities or faith groups.
These schools will be free from local authority control, able to manage their own assets, tailor their own curriculum and set up their own admissions procedures.
But Labour MPs, including Estelle Morris, a former education secretary, fear it will lead to a two-tier school system and have published their own Bill which essentially rips the heart out of the Government's plans.
An ICM poll for the Guardian found only 29 per cent of heads back the white paper plan to free schools from direct local authority control, while half oppose it. It found 61 per cent, were against the plan to let popular schools expand and just 15 per cent backed a banded admissions system with half of heads against it.
Michael Fullan, the Canadian academic who has advised the Government on the numeracy and literacy strategies, worries that the proposals will undermine efforts to raise standards.
He told the North of England conference that the Government had reached a "messy stage" in its reforms. The Toronto university academic said greater parental choice clashed with what was needed to raise results and was a distraction from getting social services and education departments to work together.
"I think results have plateaued because the motivation to keep improving isn't strong enough and the ideas on how to improve are not strong enough,"
he said later. You have to get the hearts and minds of teachers and I don't think the market model will do that."
He attacked Ms Kelly's notion, that schools could be encouraged to collaborate and at the same time introduce a market system in admissions by giving parents greater choice. "Saying that the two policies will go together does not mean they will," Professor Fullan told journalists.