If he has a 504 plan in place that wasn't followed when assessing him for the gifted program, they should at least allow him to retake the testing with his accommodations (reader, extended time, scribe, everything he has in his plan) or they are clearly violating his rights and knowingly denying him access to the program solely on the basis of his disabilities. If he is accepted to the program, the 504 accommodations should also remain in place: the district cannot make a child choose between being gifted and having a disability.
You could make a strong case that he shouldn't be assessed for the gifted program using any test that could be unduly impacted by his dyslexia - it would be like assessing a blind person for intelligence using a visual test, and would not give a true picture of his abilities.
With the right accommodations in place, there is no reason that a gifted kid with dyslexia shouldn't do just fine in a gifted program. If he struggles with it due to the dyslexia, the answer is almost certainly to tweak the accommodations.
