I can't even imagine hearing that my son was left alone in a room, nevermind the damage it's caused to him. (I think some good talks with mom and dad could really help that.)
The teacher is human, and was VERY out of line. I would ask for a formal apology on paper, and if that's refused, (as others have stated,) I would run it over to the news, (but keep in mind that may hurt more than help.)
I am so sorry this happened to your little guy. I would not in ANYWAY threaten the teacher, (perhaps June meant you should just talk very sternly, and mean that you are very serious.) Threats wouldn't get you anywhere. Write down on paper, what your son has told you exactly. Fax it to the schoolboard, and mail it, certified. That way YOU KNOW it was delivered, and you'll have back-up.
If you want to contact a lawyer for any reasons, I can understand it. It's more than an issue with money, it's an issue with safety. You want to make sure this doesn't happen to anyone else. I think people will respect that.
As for the advice that your son is not old enough for school? Ridiculous. Any child that is willing to be honest when a situation occurred that he is able to be truthful with shows maturity, and respect. You're a caring mom, and I'm sure your child is well-adjusted and DOES NOT cause trouble. (If the very basis of school meant that children had to 'sit quietly' and listen, most chilren would be held back years.) -Can you imagine? There are worse things in this world than time outs, and as much as you want to curb his behavior as a parent, all you can do is show him the right steps. He's still going to make his own decisions- you're a great mom because you're standing behind him.
Good luck, hang in there- and give your little guy lots of kisses and love. He was VERY brave to tell you about it, (that meant telling you about the time out, too!)