No, I didn't pull it out of my arse, I pulled it out of the pretty obvious context that the OP gave:
"He has a fantastic form teacher this year and at parents eve I mentioned that he is always last in the form to get a merit as obviously his behaviour in class does not naturally lead to the teacher feeling like he deserves a merit. She said no problem. I'll sort."
So he got a merit because OP put teacher on the spot and she obviously felt she couldn't refuse, so gave him the merit but for some reason couldn't / wasn't willing to hide the fact that, in her eyes, he doesn't deserve it as much as the others.
"Then as lovely teacher starts to say how DS was struggling in yr 3 at first but is really trying hard and settling in brilliantly he starts waving his arms around like he is conducting the audience."
Why do you think it was this moment he started acting out? Saying he was struggling but trying hard and doing better is fine in private or at parents evening. It's not nice to say something like that at an awards event in front of the whole school, especially as, according to OP, the teacher was "waxing lyrical" about all the other kids who got merits. Ouch. How do you think that made OP's DS feel? How would you feel in his place?
Prize givings are supposed to be a time for praise, not veiled criticism. Why did the teacher feel the need to say that? Maybe the Head questioned her decision to give him the award so she felt she needed to justify it? Who knows, but if she felt she couldn't wax equally lyrical about him as about everyone else then she should have just been honest and told OP "no" instead of promising to "sort it".
It's obvious that OP loves him (I never questioned that!) but equally obvious that she's disappointed he's not the "school geek" like she was. Where do I get this "incredible insight"? From OP's post where she says as much in black and white. Hardly rocket science. Kids pick up on parental disappointment and it affects them really badly. They can mask it, often very convincingly, but it still has an impact. Not everyone who appears to have high self esteem actually does. A lot of apparent cockiness in kids is anything but.