I agree, I think they do have the right to refuse but a good centre would be able to accomodate cloth. You might have to pay more in fees though as storing/laundering/and time spent managing them would affect the centre's bottom line (excuse the pun). If they accepted cloth they would legally have to be prepared for every child using cloth. I know this wouldn't be the case but they would have to demonstrate to community services that it could be hygenically managed. I use cloth nappies and I know the extra work that is created rinsing them properly. I wonder where the centre would store the rinsed nappies? You couldn't put them back in the child's bag like you do when you rinse a wet pair of undies. Would each child need a bucket? Imagine a room full of 30 buckets. Would that smell?

I'll all for fabric nappies but having worked in a child care centre myself I can understand the logistics of allowing cloth to be tricky. Not impossible, but tricky.