i think theres beena massive over reaction here on both sides.
I think your child has just had a major issue adjusting to school and clearly his behaviour is unacceptable....you will need to reinforce the rules of school, and support them in what they are trying to do.
The head is correct - it is grounds for exclusion, but I dont think she is threatening that - I think she is letting you know that this behaviour is not OK, and that you will need to step up and support the school. a shot across the bow if you like. Its amzing how many little princes there are and mummies who refuse to deal with the issues at home, and they carry on at school.
The hitting thing - thats down to you im afraid. If you allow him to hit you, he will think its OK to hit adults. You have to be really firm with him and really have zero tolerance. Get down on his level, tell him you will NOT hit me, and set a suitable punishment each and every time - eg, send to his room, half hour off bedtime, no TV for the rest of the afternoon, no WII games, no pudding after tea, no bedtime story, no pocket money - experiment to find out which is worth most to him.
Id also say that children are great mimics, and that the teacher is trying to nip this behaviour in the bud. We had a class in reception with 5 wild children.....a total nightmare for the other kids who were frightened to go to school because of the wild hitting spitting, biting, swearing and violent children.