Handwriting is not stressed anymore, but writing is.
Quite a few of us who are parents of dysgraphic kids have found that handwriting is, in fact, stressed quite a bit in many schools. Not that it makes any sense, but just fwiw!
From my perspective, very few students develop evenly in all subjects - handwriting at grade level expectations in kindergarten isn't something I'd worry about. If your child wants to practice at home, HWOT is a good way to go, but if she'd rather do other things such as focus on reading, I'd let her do that. I do believe the reading and simply spending time wherever her natural curiousity takes her is far more valuable at this point in her education than worrying about her handwriting.
Another thought:
"However, she mentioned that dd's writing output (while on level for kindergarten) doesn't match the speed of her reading ability and is causing dd frustration."
This doesn't entirely make sense, I think what the teacher means is that her handwriting ability isn't up to speed with your dd's thought processes or the high volume of the thoughts she'd like to express. This isn't uncommon at all in the very early years of elementary, for children with any level of overall ability. Our elementary schools offered a lot of options for "writing" in K-2 grade - children didn't just write, they drew, told stories, created plays etc. If you want to help your dd develop her "written expression" have her tell you stories verbally, let her use Garage Band or something like that on the computer to record stories, or have her draw pictures to illustrate stories.
Best wishes,
polarbear
