Irena - I don't think he can be failed if he doesn't read those specific books. Maybe set up a special reading challenge for him at home; let him set a target of books and read them. Take them to school etc. You can tell him quite bluntly that those levels are unnecessary to monitor his personal progress, that he should read for enjoyment rather.
you are not failing him this way, he is not stagnating - he will be moving ahead faster than on the DRA levels, and you can thereby explain to him that the levels are unnecessary for him and that you want him to pick books based on his interest rather than the school's perception of where he should be at now. The teacher should be happier because he isn't asking for more challenging readers, so win-win for everyone I'd say.
It took me ages to get Aiden reading again after this exact same issue with the DRA levels. He got so frustrated when he wasn't progressing in the levels and I wish someone had told me earlier to just subvert.
Someone here once said something about advocacy for the general gifted populace being awesome - just not at the expense of his/her child. I didn't get it at the time. I do now.
