In that case you point out that you are following the 504 as directed (to do otherwise would be a violation), which is the direct cause of the singling out of the kid. Perhaps the SpEd Department can provide a method of being able to have the cake and eat it as well?

What does the SpEd Department expect to happen with a directive like that? Feedback/re-direction has to occur right away...otherwise it is ineffective. That's the Law of Unintended Consequences rearing it's head again.