I think this could just be a group of shy people who need time to settle into the class and to get used to their teacher and classmates before they start speaking. It obviously isn’t a language problem that we’re dealing with here. The fact that teachers of other classes say that they don’t speak illustrates this. As it’s not a language problem, I don’t think tackling language is the right way to go now. I think you just need to help students to feel comfortable in the classroom and wait for the rest to come.
It seems that the activities that usually work with classes don’t work (yet) with these people. So, you need to do something different. I suggest that in the first few classes, you work mostly on the other skills that they need to learn. Start by advancing in the other areas of the curriculum; you have plenty to be working on. You can introduce short speaking activities; say 5-10 minutes at the end of a lesson. You will be able to decide when to start doing this; it might even be appropriate to end the second lesson with a speaking activity after spending the rest of the lesson on other things. Go at the pace of your students; when you see they’re ready to talk, start doing longer speaking exercises. In the meantime, be very encouraging of all speaking activities and try not to correct too much.
I think your approach to monitoring is good; hovering around students can make students feel more uncomfortable. Also, your ideas for using pre-printed dialogues will help them to start speaking. I think that with time, most exercises will work; you just need to wait.
You can look at the following posts for activities that work and ideas for quiet classes:viewtopic.php?f=2&t=236viewtopic.php?f=2&t=602
you can also look at my reply to Alex on 10 November 2004.