I think the term "evening out" is misleading, but I do think there is something to be considered from the teacher's point of view. The way it was explained by a teacher to me (in Kindergarten/1st grade) was that it's not always evident in an early elementary classroom (K-2), who the students are that will one day be the highest-ability readers or the lowest-ability readers etc. - simply because children reach the developmentally "ready to read" point at different points in time. It's a reality I saw among the children of friends that sometimes the kids who were reading going into Kindergarten really *weren't* the kids who were at the highest reading level or highest-achieving kids overall once they were in 3rd grade or higher. The reasons they were reading sooner were sometimes simply that they were developmentally ready at an earlier age than others, or other times the kids who weren't reading simply hadn't been exposed to reading "lessons" etc before entering school. None of the students "evened out" as individuals when they reached third grade, but it was easier to see where everyone "fit" in among their peers in 3rd grade because the kids who started reading late had caught up.
When your son has his re-evaluation meeting for his IEP, will he have cognitive and achievement testing? If not, can you request it? That should give you strong data supporting acceleration or differentiation etc if that's what you're seeking - probably more so than simply being able to show that he's already reading. Combine "already reading" with strong scores in reading ability and reading achievement on a test that teachers are familiar with, and that will give you the data you need to counter an argument that he might "even out".
Best wishes,
polarbear
