You're definitely not crazy. But to play devil's advocate for a moment, isn't it reasonable to have an initial assessment period before beginning differentiation in general? (I know four weeks is so long as to make one chafe, as we're in the third week here and I'm already antsy.)
Also, the teacher's saying that, in her undoubtedly fathomless well of experience, she gets valuable feedback from the children's unpressured choices, and that she's seen kids try to "keep up with the Joneses" in the past, ruining that as a useful tool for her. Some thoughts on that: she might be right that this is helpful information; she could well be wrong; but especially during the initial assessment period, you might harmfully create a real enemy in her and also come off as unreasonable with the principal if you too aggressively suggest that she is wrong on this.
She's not insisting that your child stick to easy readers all year long. I'd take a light approach for now, remembering that the teacher (and probably principal) will feel that the teacher is due some deference in her area of "expertise". I would above all want two things at the very least: 1) when the assessment period's over, free reign for your son to read whatever he likes, bringing books from home/library as necessary in light of the fact that the teacher won't have appropriately-leveled books, and 2) some definite (and short) date by when the assessments will be over. Best of course would be to bypass the teacher's assessment period; I just don't know if that's going to be possible, not knowing enough of the situation.
I might ask innocently during the meeting whether some sort of standardized reading assessment would be helpful, mentioning that there are some online ones available (DORA springs to mind and might help because it can generate some high, impressive grade equivalents), which you'd be glad to pay for. Go in if you can with samples of reading material (and if possible reading comprehension writing samples, past reading comprehension test scores, etc.). You might try giving full credit to the teacher's wisdom and expertise, while saying that your son is just so far out of the norm that that sort of assessment approach might not work as well as for children who were closer to normal.
You might ask how she plans to differentiate the children who pick the toughest easy readers, and ask how many there typically are in a classroom. Mention more than once what he's reading at home, and ask if she has any way of assessing children who can read at that level.
I'd try to stay away from specifically mentioning boredom (that could sound like "he's not being taught, and you're hence not doing your job" in their ears). Instead, I'd kill two birds with one stone by saying things like, "Research shows that highly gifted children can lose attention and focus when they are not given appropriately-leveled material" or something-- this will suggest that he needs higher-level material even during the assessment phase, and hopefully put a stop to any suggestions by her that he can't handle high-level material due to lack of attention span.
I'd use the phrase "evidence-based practice" and similar language whenever possible. I was given that advice, and I think it helped. I noticed that the school teachers and admins tend to use it in my local area as well.
I might also make a video and bring it. Have him read a passage from a Percy Jackson book and explain what he just read. Whip out your laptop or other device at a key moment and say, "I have something to show you that will really show his current reading ability we see every day at home, and will take just a moment." It will be hard for them to refuse.
At the end, I'd perhaps wrap up with, "I see him all the time just turn off when he is asked to do things that are too far beneath his level. It's just hard for him to stay excited when that happens. I'm just trying to avoid that. DS presents a really rare situation, where a lot of assessment tools may not work very well if his ability level isn't taken into account."
Just some random thoughts. Good luck with the meeting, and please report back.