As the OP hasn't commented on the issue herself yet, I hope it's okay to chime in with information I remember from a different thread about the OP's daughter before this thread gets derailed any further by speculation about the secret dark agenda on the part of the school, namely that the school her DH teaches at is an international school in Belgium with a population of 78% of gifted or high ability kids. So state funding is probably not an issue, and I assume that tuition would be free or heavily reduced for staff children. So all the school/the gifted ed teacher stands to gain from this is another bright little kid enriching the classroom atmosphere.
Now, I suppose it is possible that the teacher will do nothing with this student and with the others in her class. That's one of the reasons I suggested in my first post that the OP should observe the class and talk to the teacher, as well as discussing it further with her DH. If the class really isn't appropriate at this time, then they will be making an informed decision. Keeping an open mind, rather than leaping to judgement on a bunch of unfounded assumptions, is a very good strategy to model for children.
What Ollyoxenfree said. The OP doesn't want to do what the teacher suggested, so she doesn't have to, but why not try it out, for the child's sake? Are you worried about the "slippery slope" Miranda mentioned?