This is a very strange form of differentiation. I can see why your DD loves it! I would definitely worry that this is what your DD will come to expect from school and that would probably not be for the best.
On a slightly different note, how is this affecting the other girls in the group? I'm assuming the teacher doesn't believe that she has nothing to teach any of them. Are they also just doing their own thing and no longer participating in class?
I would have been so upset if a teacher told me that I couldn't participate in class, though there were times where I made this decision for myself. I would like to think that there is an answer other than encouraging your DD to "check out" in her class.
I wish you luck with whatever you do. Socialization vs academics can be an incredibly hard choice.
