Smooth linear algebraic groups over the dual numbers
This is not a direct answer to the question for a general group scheme $G \to S$ and I am not an expert in this area. However, I would like to point out that the resolution property of stacks is a natural condition that appears in this context of Hilbert's 14th problem by work of R. W. Thomason:
Equivariant resolution, linearization, and Hilbert's fourteenth problem over arbitrary base schemes Advances in Mathematics 65, 16-34 (1987)
Once and for all let $ \pi \colon G \to S$ be an affine, flat, finite type group scheme over a noetherian and separated base scheme $S$.
Recall, that a noetherian algebraic stack has the resolution property if every coherent sheaf is a quotient of a vector bundle (a locally free sheaf, which will be always assumed to be of finite and constant rank). Therefore, the classifying stack $B_S G$ has the resolution property if and only if every coherent $G$-comodule on $S$ is the equivariant quotient of some locally free $G$-comodule. The latter is the definition of the $G$-equivariant resolution property of $S$.
What we need is his Theorem 3.1: $G \to S$ can be embedded as a closed subgroup scheme of $GL(V)$ for some vector bundle $V$ on $S$ if $B_S G$ has the resolution property. If $S$ is affine, $V$ can be taken to be free.
Thomason does not say that the converse to Theorem 3.1. also holds. I guess that this is true if $S$ is affine, but as I am always getting confused while working with comodules, I cannot give a rigorous proof at the moment.
Nevertheless, it is worth to ask when $B_S G$ has the resolution property. Thomason proved this in the following cases:
- $S$ regular and dim $S \leq 1$,
- $S$ regular; dim $S \leq 2$; $\pi_* O_G$ is a locally projective $O_S$-module, e.g, if $\pi \colon G \to S$ is smooth and with connected fibres.
- $S$ regular or affine or has an ample family of line bundles; $G$ a reductive group scheme which is either split reductive, or semisimple, or with isotrivial radical and coradical, or over a normal base $S$.
In particular, if $S$ is the the spectrum of the ring of dual numbers, then this provides an affirmative answer to the posted question if $G \to S$ satisfies the conditions in (3).
Even for $G \to S$ arbitrary with reduction $G_0 \to S_0$, we know that the reduction $X_0=B_{S_0}G_0$ of $X= B_S G$ has the resolution property by (1). So we may reformulate the original question as follows:
(Q2) Is the resolution property preserved under the first order deformation $X_0 \to X$?
Lifting of various locally free resolutions from $X_0$ to $X$ is probably not the best approach. However, it suffices to lift a single locally free sheaf. Let us see, why this is true. A noetherian algebraic stack with affine diagonal has the resolution property if and only if there exists a vector bundle $V$ whose associated frame bundle has quasi-affine total space. The normal case was proven by Totaro in
The resolution property for schemes and stacks. J. Reine Angew. Math. 577 (2004), 1--22. 14A20 (14C35)
and in my thesis, I am currently working on, I show that this really holds for non-reduced stacks too. Therefore if we can lift $V_0$ from $X_0$ to a vector bundle $V$ on $X$, then $V$ has still quasi-affine frame bundle as its reduction is quasi-affine. The obstruction for this lies in $H^2(X_0, I \otimes V_0^\vee \otimes V_0)$ where $I$ is the coherent ideal of order two defining the deformation $X_0 \to X$. Probably, the ideal can be removed here with some tricks.
In our case this cohomology boils down to the second group cohomology of the $G_0$-representation $I \otimes V_0^\vee \otimes V_0$. In particular, if $G_0 \to S_0$ is linearly reductive, the obstruction is zero.
Therefore we have proven:
If $G \to S$ is a group scheme over an artinian base with linearly reductive special fibre, then $G \to S$ can be embedded into some $GL_{n,S}$ as a closed subgroup scheme.
Clearly this still leaves out interesting cases and probably this can be proven more directly avoiding stack theory.
This doesn't answer the question posed, but maybe speaks to the one you didn't ask... In Bruhat-Tits [Groupes Reductifs sur un corps local II] 1.4.5 shows for Dedekind A that an affine A-group scheme which is flat and of finite type has a faithful linear representation.