I'd keep the spells. I'd love to have it set in Salem, Mass. I think the houses would have to be different named, but could provide the same ....functions. like ___=Gryffondor ____=Slytherin. If I may suggest some house names
House Foxglove: Color, royal purple and silver, Foxes for their symbol.(the Ravenclaws)
House Florifun = Soft brown and black, Otters for their mascot (The Hufflepuffs)
House Prydion = Bright red and white, Eagles for their mascot (The Gryfondors)
House Viserious = Dark grey and gold, Bears would be their Mascot (The Slytherin)
And maybe it could be a huge castle in the woods thats hidden by magic. It could have the same classes, we could offer up people to play both the students and the teachers. Whatever strikes their fancy. (I personally would love to play a potions teacher and a student. I'd be willing to play Headmaster if no one else would want to...mostly cause i have an idea for it.)