Hi there-
After reading your story, I think the following:
*First Grade is probably too young to have such extreme consequences and your friend is probably right. Putting a first grader in the position to grade their own papers is probably not age appropriate.
*Your daughter made a mistake, she is human and some consequences are extreme, even in life. You don't always know how extreme the consequences are going to be and so perhaps, your daughter has learned an important lesson...the hard way. This is probably okay and she will likely NEVER do this again.
*I wouldn't be so hard on the teacher with regard to her comment of asking you to talk with your daughter. She has a lot of kids and some parents are more attentive than others. In order to make sure that there is follow-up at home, I think that she did the right thing and let's face it. There are a lot of single Mom's out there who don't have the time, energy or focus to think things like this through. So, the teacher can't assume.
*The nose bleed. Wrong, wrong, wrong. The school nurse should have notified you. Any problem could be a symptom of something much worse and so proper follow-up at home is equally as important as proper follow-up after an in-class incident like cheating.
I would have a talk with the teacher and let her know that you appreciate her call and have discussed this issue with your daughter but that you don't feel like her policy is age-appropriate and that putting your daughter in the position to potentially cheat is not right. Mention that your daughter was wrong but that she gave your daughter the outlet and that first grade was too young. I would also talk with her about the nose-bleed and stress the importance of proper follow-up at home.
If you don't get anywhere, I would set a meeting up with the Principal. I know it's hard but you aren't going to like all of her teachers and unfortunately, this teacher may have something against our daughter. If so, let her know that you are involved and that her behavior is not going to be tolerated.
Hope this helps. Good luck.
N.