I would have been furious if a teacher had deliberately humiliated my DS- and involving other kids is inexcusable.
I know that this thread is about the lack of growth shown on the DRA and the teacher who sounds kind of like a bully, frankly.
My DS7 took the DRA earlier this year, and I know that understanding the characters (motivations, growth, etc.) was what kept him at the 3rd grade level. I give him mid third to fourth grade options for "realistic fiction and characterization." I read some classics out loud that emphasize different people, motivations, character traits. Right now, we're finishing up "Black Beauty." I highly, highly recommend reading it out loud and talking about it.
Books that are fantasy, plot driven, etc. DS goes all the way up to middle and high school provided that the themes aren't too mature. Right now, he's valiantly trying to get through 20,000 Leagues Under the Sea (his reading choice-ideally, this one could have waited).
I give DS math at home rather than wait for the school to get with the program (he's in private). I don't know how sustainable this will be long term. At some point, I may find that we have to homeschool or request more accommodation. We switched schools primarily because of math, but also because the reading wasn't up to par. My DS scored nearly four years above grade level in language (the school's own test!) and they insisted upon keeping him at a 1st grade reading level. "See Spot Run" at school and "Charlie and the Chocolate Factory" at home.