Daycare called earlier this week, because Tumaini was having a hard time on her first day back from vacation and kept crying for me. They asked if I could come spend some time with her, but at daycare.
During the hour I was there, I saw two kids being put in "time-out" for using the word "no". The care provider would sit with them, and explain that she didn't like them using the word "no", and that they would go play with the other kids after they "reflected" for a few seconds. The kids didn't cry, and while I don't do time-outs, I have no issue with daycare using them, especially if someone sits with the kid.
However, I do have a problem with my toddler being thought that it's wrong to say no. 1) They're at an age where it's basically their favorite word; 2) Saying no can be a GOOD thing. I know I'm probably extrapolating, but I want her to feel comfortable saying no to what she doesn't want, especially later on in life, when they'll be unwanted sexual advances, drugs, alcohol, and general peer pressure. She's a person, she has a voice, and she should be able to say "no".
Do I say something? Do I let it slide? I was going to let it go, but it's really been bothering me.

Re: Daycare and "No"
As for the "no" timeout. I agree with you. No is a word and kids are going to say it. There are also times that you want them to say no (like if they want more milk, do not need to go potty etc). I think that punishing them for saying the word can cause a hug problem later on and like you mentioned associate bad feelings with it. I would speak with the teachers and the director about it ASAP.