You have a couple of issues going on at the same time. My antennae perked up the tingliest at the boundary violation issues of "personality" tests and instructing your daughter to erase and re-do answers to said tests. Specifically, I seriously do not believe that the teacher is qualified by the school district or the state board that regulates professions to administer personality tests - even the touchy-feely hippie ones or those from one of the ladies' magazines are out of bounds. On a personal note - if this were me finding out the teacher was administering those tests I would be filing formal complaints with the school system, the state Dept. of Ed. (both for inappropriate behavior and activity outside the scope of her teaching license/certificate), and the state Dept. in charge of regulating psychologists/counselors (unlicensed practice). But that's just me.
Your daughter's reading during the timev the teacher is talking may or may not be problematic from an academic perspective. It all depends on what she is reading. If, for example, she is reading the text and "tracking" the teacher against the text she should be on firm ground, while the teacher would appear to have near- if not clinical - pathological issues of authority. If your daughter is reading something outside the tect but related to the subject being instructed then essentially the same thing goes. If, however, your daughter is doing other school work whilst the teacher prattles on,
and your daughter is passing or better in that subject being prattled about, then the teacher has a problem with being an effective educator as she seemingly cannot hold the attention of her student(s). This needs to be reviewed by the teacher's supervisor through observation and evaluation. If your daughter is otherwise not disturbing/interrupting the class and getting passing or better grades, there should be no problem except for the teacher interrupting class instruction time to try to deal with an issue that could and should be dealt with outside of class - probably by a referral from the teacher to an educational specialist to see if your daughter needs to be placed i an advanced class here or there.
If your daughter is reading Judy Bloome or other trash (includng the WSJ or Congressional Record) during class then she is being marginally rude and you should discuss that with her.
At this point I would stromgly advise you
NOT to meet with the teacher for the purpose of conferring or collaborating. Go solely for the purpose of fact-finding. Attend the meeting but do nothng but a) listen to the teacher explain what she sees taking place (recitation of dates/times and description of behavior(s)), b) hearing any statements of opinion of your daughter's academic achievement on both a personal basis and as compared to the class as a whole, c) hearing and statements of personal opinion or "feelings" expressed by the teacher. Personally I would bring an audio recorder and lay it on the desk in front of the teacher, announcing it is your intent to record the meeting. Then make a recorded introductory statement noting date/time/place/participants and asking the teacher to verbally acknowlege her consent to being recorded. f the teacher refuses o give consent turn the device off, whip out pape, and start taking notes. Tell the teacher to slow down and repeat herself whenever she gets ahead of your ability to write it down.
DO NOT contribute anything to the discussion at this stage except your desire to obtain facts/information.
After the meeting review what you have heard/seen and your emotional impressions of the teacher. Review the school system's guidelines for the "gifted" program and start thinking about how this might be a direction you want your daughter to go. Also review your thoughts about getting into home schooling and why this circumstance serves as the impetus to move in that direction.
After all of this you might want to arrange a meeting with the school guidance counselor (do they still call them that?) and/or the school psychologist
before meeting again with the teacher
AND her supervisor (both of them in the same room at the same time) to discuss your daughter and how she and the teacher are interacting. From that meeting you might feel a meeting with the Principal and/or the folks in charge of the special education programs are also in order.
[As a side note - you can sue a school district for not recommending a child enter the gifted program as well as for not recommending a child having difficulty in keeping up educationaly enter the remedial program. Dept. of Ed and Dept. of Justice frown on both.]
When you have contact with the folks at your daughter's school be sure you do not make them see you as antagonistic or hostile on any manner. All you are trying to do in the first meeting is gather information - let the teacher prattle on and give you enough ammunition to blow her up multiple times over - there is no need to interrogate her. The audio recording is just because you recognize the issue is important and don't want to risk missing anything she tells you. Yeah! Tat's my story, and I'm sticking to it.
stay safe.