I think your concerns are merited. I'm 100% with you--this is not a good situation for Ghost.
I was worried about the reading level in the class from the start of your thread. It seems like it's even worse than it appeared. Reading TO pre-teens? Every day? Why? Contrary to what she's claiming, that is NOT how you help literate 13-year-olds to gain an understanding of the written word! Kids who can't read, sure. But not literate pre-teens! They need to wrestle with shades of meaning and begin to state their positions and construct arguments. They need to think about what makes prose/poetry beautiful, meaningful, and/or important. That means they need to TALK! WRITE! THINK!
Aargh!
(Sorry about the preaching to the choir there! It got away from me!)
In short, pretty much everything she's doing seems utterly inappropriate for a 7th grade class, let alone for a gifted 7th grader!
You are in a tough spot, made even tougher since she's already appearing to have an ax to grind with you. I'm sorry. That's just no fun, and it makes it very hard to know how to proceed.
You say you're not necessarily inclined to make further waves, but it sounds like you don't want to let it drop either. (Please correct me if I'm reading you wrong.) I guess I'd ask what your gut feeling is here. What do you *want* to do right now?
If it helps, I always remind myself in situations like this one--when I'm feeling more helpless than I would like and I just wish the other person would straighten up!--that we can't change the behavior of others, only our own actions and how we respond to the other person. Sometimes that reminder helps me to stop focusing on what isn't happening and see a possibility stemming from my changing something about me.
Unfortunately, I'm not seeing any easy solution.
One question: are there other parents annoyed, too? Even asking around is risky, since it's sure to mean that you're talking behind the teacher's back or some such silly thing. But it might be worth asking about. I think of the "one is a nut, two are a nut and her friend,...and more are a force to be reckoned with" that someone kindly posted here. (To paraphrase...) I find it hard to believe that ANY parents are happy that the English teacher is merely reading aloud to their kids. You may be the first, but I sincerely doubt you're the only!
I wish I were more help. I hope the situation improves soon!
