I'm wondering whether you might be able to direct me to any literature that shows that Steiner actually did support the idea of differentiation of instruction in the classroom…?
Yes, Steiner did support differentiated instruction, but you have to read the literature very carefully because he and the other teachers at the first Waldorf school did not use technical terms but rather described what they were doing. Hence, there is no indication where Steiner mentions “differentiated instruction,” but he does approve of students doing different things in the same classroom at the same time–in fact, he says it is a pedagogical goal and then states: “Actually, we should see it as an ideal that we could teach mathematics in one corner, French in another, astronomy and eurythmy in the others, so that the children have to pay more attention to their own work.” (Faculty Meetings with Rudolf Steiner Volume 2 page 465, which comes from the faculty meeting on Tuesday, December 5, 1922).
You can see that Steiner loves using hyperbole to make his point! If it is good to have four different subjects taught in the same room at the same time (!), Waldorf teachers can rest assured that it is desirable to meet with a group of struggling students to work on basic literacy skills like phonemic/phonological awareness and phonics rules while the more advanced students do an independent assignment such as copying a final draft of a writing assignment, reading a passage silently and answering questions, etc. Furthermore, teachers can rest assured that it is desirable to give students different spelling words based on their phase of literacy and to pull aside the students who need more direct instruction while the rest of the class does a separate assignment. All students must develop the capacity to focus on their own work and do their own thing regardless of what the other students are doing. It's a pedagogical goal of Waldorf education.
Steiner would be spinning in his grave if he knew that teachers were insisting that students always do the same thing. He wanted Waldorf education to develop capacities in students (such as phonemic awareness and symbol imagery and the ability to focus on their work even when other students were doing something else). Insisting that students always do the same thing is to treat elementary-school children as if they were still in Kindergarten, something that violates Steiner's teachings about child development.
Conclusion
This is one of the biggest problems Waldorf education has: it is so hard to understand what Steiner said. However, a lot of his work is fairly aligned with best practices–it just needs to be organized and explained. I did so in the book Continuing the Journey to Literacy and I also did so in The Roadmap to Literacy: Renewal of Literacy Edition (which should be coming out in 2022). When teachers understand how education should develop capacities, much of it is straightforward and aligns fairly well with modern research. Kids do need to be taught the capacity of phonemic awareness, and it is often necessary to differentiate instruction. Teachers should make use of every minute in the classroom.
All the dross that has accumulated over the last 100 years has sent teachers in the wrong directions. I hope that my books (and future courses) will provide a better understanding of what Steiner said so that teachers can give up the practices that are harming students academically and take on best practices. Ironically, best practices align much more closely with Steiner's indications than most teachers realize.