That is ridiculous renie! I would talk with the teacher or principal about what the purpose of the homework is exactly. If they know that the child knows the material, then why do they have to do it? And if they have other homework replacing it then it definitely should not be necessary. They shouldn't be punished because they are gifted. It is hard though, when you ask for more and they give you more you can't complain too much. I would just space out when you hand the homework in and maybe let them know that while the work she is sending home is appropriate, that since she is still 5 (or however old she is) that you don't want her to spend more than 20 minutes on homework (or whatever amount of time you feel is appropriate).
My DS5's first grade teacher was confused as to why his sentences weren't more elaborate and creative when he had to write out spelling word sentences. I told her that while he writes good, his hand is still 5 and he tries to find a short sentence because is well aware that the more elaborate the sentence, the more writing he has to do. I remember back in October when he got the word "because" for spelling word and said "oh no...this is going to have to be a long sentence because I have to explain something." And a few times he has still gotten some busy work (looking up and writing out definitions) Not sure the purpose of that, but didn't want to complain too much. Thankfully DS really doesn't complain about it and doesn't usually get too much busy work.