That's not the Good Friday Agreement. That's the Common Travel Area which has been in place long before the GFA and long before Schengen. The UK and Ireland both opted out because, at the time, they saw little benefit in joining.

The wording of the treaty makes Ireland's opt-out from eliminating border controls conditional on the Common Travel Area being maintained. An important reason for the Schengen Agreement was to make daily cross-border commuting by workers easier as a part of free movement for workers. The United Kingdom and Ireland have a short land border, which is only to part of the UK, making this reason less important to them.

The British government has always refused to lower its border controls as it believes that the island status of the CTA puts the UK in a better position to enforce immigration controls than mainland European countries with "extensive and permeable land borders". While not signing the Schengen Treaty, Ireland has always looked more favourably on joining but has not done so in order to maintain the CTA and its open border with Northern Ireland.

So Ireland could, if it wanted to, join Schengen. But had clearly deemed it of little benefit to them if they then need to police a border they have no intention of policing.