It *is* discrimination. I'm no legal expert, but I'm fairly certain anyone who is would agree with me. Have you spoken to any of the school governors? They should be your first port of call. If you have no luck there, then you need to speak to someone at the LEA headquarters. I used to work for a team of SEN advisers in our LEA, and although they didn't deal with individual pupil cases, they were very good at getting parents in touch with the right people.
It may also be worth taking advantage of the free half-hour's advice that many solicitors offer, especially seeing as how the school won't give you your money back.
Of course, you could risk making a big fuss about it. Get your local paper and local BBC/ITV involved - they love a story like this and you never know, the school may just back down.