"All the school students in the vicinity will be taken to the nearby theatres during the festival."

The sentence is discussing a plan to take school students to nearby theatres during a festival. The first blank requires a word that describes the location of the school students. "In" is the best choice here, as it indicates that the school students are located within the vicinity.

The second blank requires a word that describes the timing of the event. "During" is the best choice here, as it indicates that the school students will be taken to the nearby theatres at the time when the festival is taking place. The word "during" suggests that the school students will be participating in the festival-related activities taking place in the nearby theatres.