My DS is in K, and while he has access to the whole library (note--we had to request this) and therefore can free read chapter books of his choice doing free reading/free choice time, I think there isn't a ton of this time during the day. I know it does happen occasionally, and I'm glad, but it's not a huge part of his school life. In his reading group, they are definitely not doing chapter books, although he is now going to 1st for reading. There isn't anyone else at his level who is ready for it.
There really are some high-level picture books out there and one COULD do some nice small group work with them in K and 1, especially given time constraints. My DD worked with hard picture books in K in a small group and it was okay. What concerns me more about your situation is the adherence to dogma, which is never a good sign, IMO. I don't know this philosophy, but it sounds like it might not be good for gifted kids--smacks a bit of Waldorf in the sense of "They are all ready for X at Y age and not before."
