My daughter's middle school has the same rule. If you don't score proficient or above on your state standardized test, you can be pulled from "Extension" courses to take a test prep class. Band and chorus meet during "Extension" daily.
Fortunately, my daughter has always done well on the tests. But every year when they start, she is abjectly terrified because her entire goal in life is to play French Horn in the pit orchestra of a Broadway show. She knows that if she fails the tests, she will be pulled from Band. Talk about high stakes testing!
Still, I think if the situation ever occured, I would do exactly what you are planning to do - go into school and insist they put her back in Band.
Has your daughter taken the state tests for this year? Maybe when her results come back, they will be more willing to accept her in chorus.
Good luck!!