I think it is important to consider the difference between whether a student knows their math facts and how fast they can spit them out, i.e. I am speaking out for those who have slow processing speeds, like a couple of my kids, one in particular who could never have finished the 100 facts in 5 minutes at that age - more like 8 or 9 minutes - yet obviously knew the times table as well and soon thereafter was calculating simple exponents in his head. He has obvious mathematical talent, he's performing about 2-3 grade levels above his age, and yet his slow processing speed (as documented on the WISC) means timed tests can be huge problems for him. Fortunately his teacher understands this.
If you are certain your son knows his addition facts (and it sounds like he does - try the 100-problem worksheet untimed), I think it is counterproductive to require them to be completed within a certain time, and a shame that the teacher/school is holding him back from learning concepts due to timed tests on computation. (another example - my other ds, the twin brother of the one I mentioned above, is in a classroom where the teacher does do timed tests, but she does NOT hold him back from learning new concepts - the timed tests are just something they work on in addition to the concepts/alongside the concepts).
Also, I'd question the double-standard of requiring 100% vs 80%.
this article may help
http://mathsolutions.com/documents/9781935099031_message18.pdf (there are a couple of citations at the end of this article as well that may be helpful if you end up in a situation where you need to prove your case)
As for how to approach this situation, I don't have any answers - I'm terrible at confrontation, especially teachers - I'd probably first try to have a casual conversation with the teacher. I might say things like "my understanding, from what I've read about timed tests, is...."
