OP, YANBU. Sorry, but if I was attacked in the street, would I stand and do nothing? No way! Would you teach your daughter if she was raped or was on the receiving end of unwanted sexual advances that she should "turn the other cheek"?
Nemo's 5yo is unlikely to do any damage to the bully if he hits him, in reality. But it will be a statement- it says "I will not stand by and let you do this to me"
Yes, as parents, we would like to think that WE can protect our children from everything, but the reality is that we cannot always be there, and at that point our children need to be able to protect themselves
Nemo, if I was you, I would make sure that the head is aware of the bully's previous behaviour, so that if your ds DOES hit him back, it will be realised that has been in self-defence. I don't encourage my kids to hit, but in this situation, I do think you are being reasonable. It also gives a child confidence to realise that they CAN do something for themselves to stop the bullies. It certainly doesn't mean that your son will suddenly start going around hitting children willy-nilly. Children are not stupid. They do understand the difference between defending themselves and hitting out, and to pretend otherwise is underestimating them in the extreme. I really hope you get this sorted out.