If I understand the history correctly, you had your child evaluated by the school for special ed and she was found ineligible for an IEP. You then had her tested privately and you found that she indeed has a reading disability and needs specialized remediation.
While it probably makes sense to pay for private tutoring if you can (it is often of higher quality and it avoids "pull outs" in school), I would not let the idea of an IEP die. If she qualifies, she should have one. In addition to tutoring services, an IEP can offer accommodations. The goals can help put the teachers on alert as to her areas of challenge. You can go on record with your concerns and vision. AND when it comes time for the SAT, it increases her chances of getting accommodations such as extra time.
That said, I would contact the school and set up a meeting to discuss the evaluation report and ask that the team reconsider her for eligibility under IDEA. You have a right to disagree with the TEAM's original finding, to present new data and to try again.
AND - I agree with master of none - the teacher's behavior is bullying and unacceptable. I would address it first with her directly, and if you don't get anywhere, go to the principal.
Finally, be sure that the tutor you hire is experienced in teaching children with dyslexia. They should be using a sequential, multi-sensory, phonemic approach such as The Orton Gillingham Approach or one of it's derivatives: LiPS, Wilson, Singerland, Project Read More info at
http://www.interdys.org/Also - some must reads: Overcoming Dyslexia by Sally Shaywitz, Straight Facts about Reading, Louisa Moats, All Kinds of Minds, Mel Levine
Best of luck.
