I'm afraid I'm not familiar with the American school system myself, but just wanted to add some support and encouragement. I'm Dyslexic myself, but only got diagnosed when I went to university (and pushed to get tested), so went for many, many years not knowing what the problem was.
With the school, I think you just need to keep sticking to your guns, and don't sign anything until you feel your son is getting what he needs. If there's anyone in your area who could give advice, or who over-sees the special educational needs of kids in your area (as I said, don't know how the US system works), go and talk to them. Get as many opinions and inputs as you can, and do whatever you have to to help your son.
There are also plenty of things you can do with him at home, to help him along the way. Obviously I'm not saying that you should give up on the education system completely, and provide all his support from home, but my mother helped me tremendously when I was growing up with dyslexia. Try ad get him into reading and using books, in whatever way you can. Don't force them on him, but find something that is the right level for him, that will be interesting to him. I know that when I was younger, I was heavily into fact books, as they have lots of interesting information, laid out in small chunks with pictures to break text up. Another way to go might be comics, 'create your own adventure' books or reading to him for a bit each day. Really, the best thing you can do yourself, is to help him find a love of books. It probably won't be easy, it will probably take a long time, and it will probably be frustrating as anything for you at times, but the best way to improve at something is to keep doing it, and the thing that will make you do that is passion.
You might also want to talk to the school about Irlen testing. Irlen, or Scoptic Sensitivity, Syndrome is a condition that often goes hand in hand with dyslexia, and makes white pages problematic. The theory is that a certain frequency of light (this is different for different people) isn't processed properly by your brain, so white, which reflects all colours, messes your brain up. This manifests in a number of different ways, but for me, I get white walls and strobing at me, lines of text sometimes swim and move, and I see white 'rivers' running through the text. I didn't know that other people didn't see the world this way until I found out I had Irlen's; until then, I thought this was how everyone saw the world! I've recently got specially tinted glasses, paid for by my school system, which have made a huge difference to all sorts of things for me.
A simple way to see if he might have Irlen's Syndrome is to change the background colour of pages on the computer, and see if he finds any of them easier to read. To do this, right click on the desktop, select properties, then select the 'appearance' tab and click 'advanced'. This will bring up a new window. From there you can just click on the thing you want to change the colour of (in this case the white background of the text box), then select the colour from the 'more colours' option (if you need more help with this, just PM me).
EDIT: Just found this self-test website, which might be useful:
http://irlen.com/index.php?s=selftests
Anyway, I wish you all the best. Stick to your guns, and keep fighting for your little boy; I'm sure you'll come through for him

. Dyslexia is a challenge but, like all challenges, it can be worked around and over-come. And just to prove this, and keep you positive, here's a
list of famous dyslexics. See, we've not done too badly for ourselves!
