SR protects the person that has it; it doesn't interfere with spells cast by the person that has it. If the slaad puts the PCs under a
cloak of chaos, then they have SR. Yes, the lawful PC spellcasters will have to overcome their pals' SR when they cast a spell on them -- if SR applies to that spell.
However, the PCs will all get a +4 deflection bonus to AC, and a +4 resistance bonus to saves -- against
everybody. They will be immune to possession and mental influence. Any lawful creature that attacks the PCs will have to save or be confused (but I presume the slaad isn't working with anyone else, given the bad guys in Lord of the Iron Fortress). Thus, I don't think this is a good tactic, unless every PC to be affected already has all those abilities or better.
Furthermore, I believe the usage (giving people SR to mess them up) is not what was intended by the spell. It strikes me as cheesy, worthy mainly of eyerolling.
Would you allow players to do the same? Will that cleric be able to cast
shield of law in the final battle with the modules villains, and mess them up in a similar fashion? If they came up with the tactic first, would you allow it? Would you complain that it was a munchkin tactic?