I'm so sorry you're having to deal with this. It sounds like maybe the teacher is in a "I learned it in graduate school so it must be gospel" thing, and really she has such limited experience with the real-world. It's lously that you're having to be the one to educate her about the real-world.
About reading acceleration, I think you should let your DS check out whatever he wants from the library (especially since this will appease the teacher). BUT, then I'd also have him read more appropriate things that either you have in your collection at home or that you get from the public library. Would the teacher be open to your son taking AR tests at school on books you have at home? You can find out which AR tests your school has by asking the librarian, usually. Another option is for you to google "reading comprehension questions" for a book your child has read and just see how well they do answering them. My kids are always bringing home too-easy books from the school library, and they read them at bedtime for fun, but I make sure that this is not what they read for their required 20 minutes of daily reading. IME, reading acceleration can be fairly easily accomplished at home.
For all the rest, though, the school really has to step up. For now it might be okay that your DS is able to focus on non-academic skills, but he will figure those things out fairly quickly, and then what? And I totally get what you're saying about your DS getting so frustrated at a little challenge. Ironically, you're right that the solution is for him to be challenged regularly in school. I hope the principal can help you work with the teacher to do this.
