When an editor, who has been given the task by a small publisher to be the art director and then tries to "direct" the illustrator to draw the text, verbatim? I have always thought of illustration in a picture book to be the "second" story/text not just window dressing, that states something twice. Should an illustrator stand their ground, or for that matter, if an art director suggested change in text, should an author stand THEIR ground??? Or... do we all just do as we are told.Oh, this is awkward. It sounds like this editor doesn't know some of the basics... and it may be hard to talk her around. You're contracted for this book, so you've either got to back out and look at your contract for what happens in the case of irreconcilable differences, or do your best to work it out with this editor.
I think of my job as more 'Facilitator of the Team' than 'Commander of the Army', so on my team suggestions from all sides are welcome (and discussed for merit before implementation, of course). But other editors are other editors.