Ohcrapbag I think what you have described does not sound too bad at all. It sounds like the teacher is over reacting!
Here's what I think, feel free to ignore me.
"... has always been quite immature compared to his peers, preferring to run around playing football or out on his bike than to playing complex games on computers and so on." This is not immaturity, in fact I would say in many ways he is more mature, knowing what he likes and doing it, and not sat glued to a screen like a sheep like (my kids) and so many others. Be grateful.
"He's just under where he should be academically which has always been put down to poor concentration and not really having an interest in reading for instance." I think this statement is very telling.
Who is telling you he is under where he should be? Does this actually mean he is just under average? Or just under what they think he can achieve?
"Him saying " I don't want to / I already know this / I'm not interested in this / my parents won't care about this ( when she told him we wouldn't be happy with him not listening ) " and generally just being very cocky and rude to her."
Well, maybe he knows some of it, or thinks he knows all of it, you can remind him he still needs to participate even if he does know things, and the teacher can remind him too. Not being interested in something you are being forced to do is not rude, it's just a fact. The answer is, even if you are not interested it is part of what the whole class needs to do and there will be other things other children are not interested in.
"Also being silly in class to get people to laugh however most are not laughing and just think he's stupid"
How do you or how does the teacher really know who does or doesn't think he is stupid. That to me (if it came from the teacher) is a rather mean spirited comment. Maybe he wants to be class clown to get some validation in a class where he feels like an outsider. Maybe you and the teacher can help him find a better way rather than selling him the story that no one thinks he is funny anyway. (not saying you are doing that but I bet the teacher is!)
Of course it must be massively disruptive to have someone messing around and making jokes, but if the rest of the class were not laughing along then I expect he would stop anyway. I think the teacher may be making it all a bit too strict, is it all about SATS and no fun at the moment, could that be an issue (my son is year 2 as well).
Of course the teacher needs to keep order, but it sounds to me like he is being rather crushed and made to feel like the odd one out, which is really not the way to get him on side, simply the way to alienate him further, IMHO.
"Not concentrating in class whatsoever so doesn't know what work he's meant to be doing when it's time for independent learning"
So can you work out with the teacher why things have 'deteriorated' at this point, could there be a reason? Health, bullying, something at home? Yes, he could suddenly have just go very 'naughty' but there may be more of a reason to it.
"Reading level is 2 below the books he reads at home as he doesn't focus at school when she reads with him" Why doesn't he focus with her? I sense that there is some sort of power struggle going on here, of course she is in charge, she is the teacher but I sense he cannot be bothered to read for her. Could you instigate some reading rewards at home and encourage him to take the book into school and then read it to her?
"She said there seems to be a lack of respect" There seems to be a lack of respect both way, to me.
"I'm really embarrassed. We've been more positive parent types I suppose and we're always proud of our children for having an opinion and a voice, for not following the crowd or trying to fit it and being happy an individuals"
You are right to be proud of these things.
"however she said it's not being assertive, just rude and wants us to agree on something he loses of an evening for poor behaviour in class."
That is a very bad idea and I would not go along with it. If he is a child who likes being out in the fresh air and doing stuff and is made to sit in a class and do stuff that is boring then home will be a refuge from that. Do not allow home to be affected by the activities at school. If we were talking major issues like bullying other kids I might see some sense in taking this issue home too but what you have described is relatively mild.
Plus the stick really is a crap incentive! You could go with a carrot incentive or better still a real sense of pride in his work at school, a way his teacher can incentivise him. I think the teacher needs to be more inventive, you can be very supportive, but for what you had said she is trying to push this onto home and has only succeeded in making you feel embarrassed and 'guilty'.
Where is he positive plan for tackling this?
"At home he is kind and considerate, very active which we've always just accepted so spend lots of time trailing through woods and so on but no bad behaviour as such." why not talk to him about all this, find positive incentives and examples. Doing well at school really does increase your chances of having more control over future careers and lifestyles so there does need to be some 'pain' for the long term 'gain' of doing well.
"She asked if we had noticed anything at home but other than not wanting to read with us" you said earlier he was reading well at home, two books ahead of what he was reading at school. I would investigate this, find out why. There is an excellent book called How to Talk so kids will listen, and listen so kids will talk
I would really recommend this book. There are lots of examples of working out solutions together, and of talking in ways that get kids talking (e.g. by not talking too much and giving room for the child to speak).
"Is this just a phase?" Maybe, maybe not. I think how you react and how the teacher reacts may determine if it is a phase. You cannot ignore it but if you or she go in all guns blazing I am not sure you will get he best result.
"She seemed really annoyed; usually very smily and jokey but not today." Sounds like she may have some issues going on for her. To be annoyed with a small child because he is disrupting things may well be a totally normal response but I think this is his education so it is not all about her.