Why Agile Practices Generally Favor Face-to-Face Solutions
[A]fter speaking with Agile coaches it appears they don't like this virtual solution because it breaks the real interactions promoted by the Scrum framework.
According to one Wikipedia entry, 2/3 of all communication is non-verbal. In an agile context, this means that in-person interaction generally provides higher-bandwidth semantic communications between team members than a comparable exchange over telephone, email, or instant messaging.
In addition, the Agile Manifesto values individuals and interactions over processes and tools. One reason for this is that tools should support the organic, emergent behavior of the team rather than forcing the team to build its processes around a specific tool-chain. In fact, in a related post I said:
Never, ever build your process around a tool-chain; always build your tool-chain around your process!
None of the foregoing means that virtual story boards are bad, or that they shouldn't be used. However, one certainly needs to be cognizant of the trade-offs inherent in using a virtual story board, and take care that the tool is not used in place of interactions or processes.
Why Virtual Solutions Are Adaptive
A physical board will generally increase interpersonal interactions, and create spontaneous communications opportunities around the story board as people update it or view it. If given the choice, I too would recommend a physical board over a virtual board in the abstract.
Having said all that, I think you are right: in your specific case, a virtual story board is necessary tool to keep your distributed team informed and engaged. However, the reason it's valuable isn't that it's electronic or virtual; it's useful because it increases communications bandwidth, project visibility, and task synchronization within the team. It addresses a concrete logistical issue; as such, I'd certainly consider it adaptive.