First, I'd advise DH to take a few deep breaths. If DD only shows what she's asked, then it's not entirely the teacher's fault that she's coming away with a wrong impression of DD's abilities. The teacher has a certain expectation of what's normal at this age, so that's what she's looking for. And if that's what your DD shows, then that's what the teacher sees.
It also doesn't help if you're silent when presented with this information at the p/t meeting. Somebody has to tell the teacher to look deeper.
Based on the information here, I'd go ahead and leave DD in her current situation, and enjoy it. My DD8 had the same experience (except that my DD showed her abilities, and her pre-K teacher reacted accordingly) and loved it. The real problems began in K, because that was more of a learning environment, and less of a fun, social one.
I'd also start figuring out what to do with her when K comes along. It's a good time to start checking into local laws about gifted kids, schooling options, etc.
