ANY violation of the IEP is a big deal and it sounds like your DS is already sliding down the slippery slope. I don't think it's a matter of "do I escalate". They have already chosen to set up a battle. I think the real question is do I push back hard now or wait for things to get worse. I would act fast to nip it in the bud. As you said the teacher may be able to claim ignorance - but only once. He has had more than one opportunity now. If the principal and chair are following his lead I think the choice is clear. Maybe other teachers who know your son better can help them understand his challenges. Or maybe a review of his clinical findings will help them to understand. The bottom line is these things in your IEP are not simply suggestions that they might want to consider. They are requirements that MUST be followed. I think showing them that you understand your DS's rights can be done without escalating - however you will need to be prepared to escalate if they don't respond appropriately.
Good luck!
