I just checked the molar solubility of Ca(OH)2 using the table linked and got 0.0125M, whereas the molar solubility of CaSO4 = 0.00490M. So clearly CaSO4 is less soluble than Ca(OH)2.
I believe the answers are incorrect - CaSO4 would precipitate, not Ca(OH)2.
However, perhaps I am incorrect...