I don't know if this helps you now, but maybe for kindergarten...
Don't know, but a couple thoughts as a general ed teacher who has attended IEPs of elem. students (preschool I'm not familiar with):
You have to sign to get special services. So if you don't agree, don't sign. They can offer you that special school but can't make you go if you'd rather decline it.
They have to provide you education- and transportation to it- in the least restrictive environment. So there's no such thing as your school being full. If you live there they have to take you.
There's a strict time limit for all special ed things- meetings, testing, services. So put your request in writing. I think if you meet with them and come prepared you should get what you want- especially b/c as you said it is cheaper for them.
Also, I've been to several IEP meetings with lawyers. If they're screwing with you, I don't know how much it costs but they'd probably get their acts together if you let them know your special ed attorney will be joining the meeting.