The council, now renamed Sportscotland, is setting up five different groups on sport and a sixth overarching group to be chaired by the sports minister.
Targets for school sport in 2003 include two hours a week of physical education for each primary pupil, sports co-ordinators in every secondary and more participation by young people in sport.
So far a small minority of primaries meet the PE requirement. And only 90 out of nearly 400 secondaries are currently involved in the co-ordinator programme.
Mr O'Neill, director of education in North Lanarkshire, said: "We'll look at school sport in the broadest sense because it is also about social inclusion and raising achievement. The review is quite timely now that we've got out of hours learning lottery money coming on stream, co-ordinators in many schools and a higher profile for school sport."
Meanwhile, uncommitted lottery cash worth pound;7.6 million a year for four years is being channelled away from general sports clubs to school and linked community projects. Ministers demanded tighter control of lottery cash and greater emphasis on their priorities: education and social inclusion.
Sportscotland, which controls the sports lottery worth pound;21 million a year, has again protested that the introduction of the New Opportunities Fund, the sixth good cause, has reduced its spending by pound;5-pound;6 million a year.
But the same restrictions as before will apply to the newly-directed funds. Schools and councils, for instance, will still have to find partnership cash to meet the total cost of upgrading facilities, a factor that has limited up-take.
Council leaders have complained about unfair treatment in lottery allocation, most notably when pound;2.25 million was awarded to the independent Mary Erskine's School in Edinburgh for the national indoor cricket centre.
But Alan Alstead, chief executive of Sportscotland, said the new funds for school capital spending could be linked to projects funded by the New Opportunities Fund.
Speaking at Currie High, Edinburgh, which has already benefited from sports lottery cash, Mr. Alstead said: "One of the germs of this programme is to open up schools with good facilities - sports halls, running tracks, swimming pools, playing fields - which cannot be accessed after school hours because of the question of payment of supervision.
"This programme creates a focus for the community to open them up and for access to the New Opportunities Fund, perhaps to extend the time sports co-ordinators are working and to pay for administrators. Clubs could also come in and assist. The potential is enormous," Mr Alstead said.
In a new departure, Sportscotland will give priority to projects in deprived communities. It will also consider higher rates of award for these areas, and linked revenue projects employing staff to make the projects work.
The programme aims to convert, adapt or increase access to sports facilities in schools or nearby clubs. Reception areas, changing rooms, lockers and showers could all be funded by the scheme.
* The members of the sport and schools forum are: Michael O'Neill, chairman; Charlie Raeburn, Scottish School Sport Federation; Mary Allison, Centre for Leisure Research at Edinburgh University; Mike Rhodes, HMI; Donald Matheson, Headteachers' Association of Scotland; Peter Gorrie, Kelvindale primary, Glasgow; John Robertson, Dollar Academy; Eamonn John, East Lothian Council; Bob McGowan, Scottish Council of Physical Education; Vivien Gourlay, Scottish Gymnastics; and a nominee from Scottish Hockey.