Oooh, Claw, that is an odd one.... I'd like to hear Star or Wet on this!
I would be wary too I think. It does seem strange to have an LA person sit there listening and judging. I take it as a 'this is all a storm in a teacup, we just need to bang heads together to get the boy some help' type approach.
This may, I think, end up with them trying to suggest that this is down to a problem with school and you and not a matter for statementing.
I actually think that this is quite a big ask. It sounds very stressful to undergo an 'observed' meeting with school. The questions which occur to me are:
What does she hope to glean from it - that you or school are not telling the truth?
How does she think it will help to observe the two parties face to face?
What will be the agenda and what will the discussion focus on? You don't want this to deteriorate into a slanging match
They must have lots of cases where parents apply for SAs and schools say adequate progress is being made. Do they observe all of them?
How will watching you and school change their view about an SA?
The more I think about this the more I would be wary that they will be there to get the nitty gritty of your case and test the strength of the school as witnesses before a SENDIST.
Legally, either he meets the criteria for a SA or he does not and focusing on the SENDIST is key because observed meetings etc are not necessarily going to result in an SA.
Perhaps you could do a formal letter to the Head of SEN asking a couple of questions and asking them to clarify in writing the purpose and intention of this meeting.