Oh, no...that's horrible -- especially since the lack of recess = behavior/focus issues = quite the vicious cycle! :-(
Are there any other teachers/classrooms your kids can switch into? Or, maybe you could talk to the teacher -- sometimes they are actually willing to listen to parent concerns in the first few days of class, especially if you can produce some sort of unofficial note before the IEP comes in. Perhaps you could have her do work before or after school if necessary, and go to the gym instead of recess -- still no fun, but she does the work and gets necessary exercise. Or hopefully the policies are fairly lax, or at least flexible if needed. Hang in there!