You just have to remember that if your child JUMPS ahead that they might miss something, whereas if they work their way up slowly and steadily, they build confidence, comprehension and knowledge.
That being said, if you have a particularly strong reader, make an appointment and talk to the teacher about how you feel. My DS was moved ahead as the school too had noticed he was probably at a higher level, and so when we met agreed to do an assessment and he was put up a couple of levels.
He could now in year one probably read higher level books with no problems, but on talking to the teacher I agree that sometimes though he can read all the words no problems, that his tone needs work and that his comprehension is not always the best as he isn't concentrating on absorbing the story but on reading the words. So we make him meet the targets for each level, even if it means reading easy books to do it, just to make sure he isn't missing out on knowledge. He got too big for his own boots, and I nearly got taken in by it, but actually he might feel things are too easy, but the best person to ask is his teacher, not him.
I concentrate on giving him books that are more advanced in our own time, so library books or buying our own. Take the building blocks laid in place at school and build on them ourselves, a good foundation might seem to be a pain when it's repetitive and easy, but it's essential. It sounds like your DD does this already with her reading of the encyclopaedia, so you are doing the right thing. Relax about what happens at school, don't be intimidated by the teacher and build a good working relationship with her, rather than assuming she is defensive and difficult, perhaps take on board that she may be right?