You have three issues here, and the least of them is how you handle the party on Friday. I would put that on the back burner, and do the best you can to just let your anger go about it for now, it will serve you well with the other two issues, which are far, far greater and of major concequence for your son.
I work as an educational advocate, and there are flags posted all over your story that you have a chance to pull out and wave and keep from calling someone like me in about three years to sort out why things have gone so wrong...I usually see families like yours after they have held back in K or 1 because the child had difficulty keeping up with one adacemic area, usually reading, and the teacher said that the child was "immature." At first, the parents were pleased with the child's "progress" by being held back, and as soon as the child was a year older than his grade peers, he was at grade level for everything, but just for a short time. As the grade peers progressed, their child did not, and by the time they contact me, thier child is older than the class, unhappy, not reading at grade level, and all the other subjects, that were previously fine, are begining to drop drasticly, and the whole issue has become the childs "attitude" and the teachers blame the child as a behavior problem. I go through the educational records fromt he start, and I see it over, and over, and over again. Please, don't hold your son back.
Instead, take your family history, and his history, and add them up and use them to get him a new way to learn to read. Whole langauge works for most kids, and it is a far easier way to teach reading than alphebet phonics. But ALL children can learn to read with alphabet phonics based programs. This is what your son needs, and with your family history of trouble with spelling (weaknesses in phoenomic decoding are familial, and even if they do not amount to full blown dyslexia, they are remediated in the same way.) What you need to do on Friday, is to set aside your anger today so that you stay on good terms with his teacher so that she wants to help you get what your son needs, not so that she is as mad at you as you are at her and she has reason to prove that you are wrong later. Trust me on this, it does work that way, and you need to be smarter than she is and set yourself up for success.
At this point in the way remedial services for reading disorders works, it is not necessary to diagnose a learning disablity, there is something called RTI (Response to Intervention) that he should qualify for without any need to be learning disabled. The point of RTI, very clearly prefered in IDEA, is for all children with reading issues to recieve remediation so that they can be succesful readers, and by doing so without any need to identify them, they can catch the kids early and therfore never need to identify the child with a disablity. In theory, this is how it should work. Kids show signs of reading trouble in 1st grade. They get in class help, if it does not work, they get stepped up to more rigorous school interventions (this has already happened for your son) if this does not work, they are to start with RTI, a researched based reading program, and the one that has been shown to work is an alphebet phonics program, the most succesful of which is called Orton Gillingham, but there are many Orton Gillingham based alphabet phonics programs out there that are effective. Your job now, is to advocate for him to get different reading instruction, not just more of the same whole language that has not worked already, if it did not work already, it will not work if they do it again and it won't work if they do it slower, or one on one, or if they hold him back (wreck his self esteem, crush the subjects he does fine in and bore him with the same stuff he already knows)
Additionally, if you hold him back, you atomatically lesson his issue. That is a very bad thing. You will be arguing that he needs help, but the teacher will be telling you, no, he is right where he needs to be with his classmates, and she thinks he is just fine. Until they all pass him over, and then, you have lost an entire year of targeted instruction, and he still is not that far behind, though you will be in a panic, he will always be compared to his grade peers, not his aged peers. Retention is a disaster for kids with specific learning disablities that respond to appropriate intervention.
So, I would say, you do have three issues: 1st: Your son should not be held back. 2nd: You need to get him the right kind of help as soon as you can. 3rd: You need to figure out a way to make this teacher love you so much that she will help you get what your son needs, and not stand in your way because she is angry with you.
My suggestions are that you schedule an appointment with a Neuropsycholgist to get a full evaluation of your sons academic profile. You need to know more than the school does about where your son is having trouble, and what he needs to fix it. Although the school does not need to evaluate prior to giving him services under RTI, you need data, you need to know more than they do, and you need to be able to tell them they are wrong with numbers if they turn you down for what he needs. You need to keep them honest.
Next, go to the party, and forget what happened already. Go out of your way to make things nice, wonderful, delightful, and do not bring up your anger. Let it go for now, it will not help you at all to shoot one over the bough at this point...think ahead, way, way ahead to your son's future. Having your son do well will be the very best reward.
Then, write a letter requesting that your son recieve RTI services for his reading issues, and request an orton gillingham based alphabet phonics program if the school has one available. Tell them that you are aware that he does not have to be identified as learning disabled to recieve these services, however, you will consent to evaluation if that is what it takes to get him into this program as soon as possible. Ask for a copy of your rights under section 504 of the rehabilitation act and IDEA because you suspect that your son has a disablity (if you use that langauge, you trigger a certain level of response, and you want that response, even if you do not think he has a disablity.) This will get the ball rolling. Then you have to see what kind of response you get from them. They may stonewall, drag feet, tell you that they don't do things this way, many responses are posible, depending on your school district, but you will educate yourself before that happens so that you will know how to respond.
So, next, educate yourself about school advocacy. log on to www.wrightslaw.com and start reading about RTI, retention, reading disablity, and advocacy. Before you get the feedback from the Neuropsychologist, read the article named "Understanding Tests and Measurements for Parents and Advocates" so that you really understand everything they tell you.
Last, face to face meetings right now are your enemy. They are feeling you out, and nothing you say or they say at these meetings will have ever happened. You want to write, not talk. You cannot hold a conversation in your hand and hold them to what they say. If you must speak, follow up with an email that summerizes everything said, especially the promises they make, and say at the end "if you do not correct me in writing within 10 school days, I will assume that all the details of our converstation written here are accurate."
So, while it may not feel terrifict right away, because I know you are pissed, remember, you need to think ahead, and I have met you over and over again...only about four years after this moment. You can avoid me by seeing to it that he gets what he needs now, is never held back, and that you always know more than the school does about your son's needs.
Good luck! Let me know if I can help.
M.