Mark, I am sorry you are going through this, we are going through it with our 5 year old son as well. Our son is the same as yours, IQ level low/normal, but has extreme difficulty stringing information together when it is verbal (reading, abc's, numbers he seems to get the beginning and end and forget there is a middle part to the sequence), however when it requires little verbal and more hands on communication he gets it and does really well, hence we have had to change our strategy alot trying to get him to learn. For instance when you ask him to count 1-20 he will skip a part of it, but when you lay cards out with the numbers on them he can put them in their proper spot.
But as far as the IEP, I believe that regardless of the IQ levels, if your child is struggling the school is required to help, if the teacher also agrees that it is needed. This could be having him do special education for his reading or receiving a special one-on-one teacher/tutor to help him through this. What I have been told is It does not matter if his IQ levels are normal if he is sincerely struggling in a particular spot and has a disability that is shown to potentially cause difficulties, they are required to help.
Hope this helps and good luck on your journey! I know they say this boys don't read well sounding out things but read much better with 'site words'...where they recognize the whole word, not saying it sound for sound...
Did your son's school test his achievement scores(obtain grade/age level in reading, math, and writing) as well as his IQ? My understanding is it is the discrepancy between the achievement scores (our school used the Wechsler Individual Achievement Test) and IQ test- which should qualify a child for special services- not just IQ alone. We also have a very bright 7 year old who is struggling with reading, math, and writing. We had him tested at the end of Kindergarten (age 5 yr 7 mon.). His IQ scores placed him in the gifted range- however his achievement scores were only in the average/below average range (showing he was not performing at the level his IQ scores were suggesting) At that time since his achievement scores were still mostly average the school did not recommend special services. I had a feeling though- that my son would fall behind the next year when more reading and math skills would be required of him- so we had him tested again (age 7rs 5 months) this time with a neuropsychologist outside of the school. This time he scored in the below average range in all his achievements and finally met the criteria for Reading and Mathematics Disorder which I'm sure the school will now have to address. We are currently homeschooling, because we will most likely be moving out of state some time next year and did not feel like fighting the Chicago Public schools (which is really struggling right now with special ed. funding). One book we are finding that is working to improve our son's reading fluency is Reading Pathways Simple exercises to improve reading fluency by Dolores G. Hiskes. He enjoys the reading pyramid exercises and is feeling more confident in his ability to decode- we are now expanding to read other books. We also do a lot of sight words as Cori suggested- We found the PPUk learning kit to be helpful as well as Duchenne Muscular Dystrophy. A guide for Parents and Teachers by James Poysky.
Hope this helps,