The best answer is to come to an agreement with the DM. While there are avenues you might pursue to mitigate what he’s doing, getting into an arms race is a losing proposition and isn’t any fun. Explain that you are aware that the Wizard class is phenomenally powerful, but that you have no interest or intent on breaking his game. Point out how you’ve already taken an almost-crippling LA +2 race, which is clearly not an optimal option: you have already shown dedication to making the game about more than just becoming as powerful as possible.
If that fails, I’d very seriously consider leaving the group. Not because the Wizard is unplayable like that – you can remain pretty powerful on your automatic 2 spells per level – but because that’s a sign that your DM is unwilling to trust you, and that’s a really bad sign.
Otherwise, Pulsehead and Jacob’s answers are good. Even if your DM gives you a little time, you may need to take advantage of them.
If things get very bad, but you don’t want to leave, you do have another option: have your Wizard refuse to go on the next inane little side-quest, so that he can stay home and finish scribing that spell. This should state very clearly to your DM that you do not appreciate what he is doing, and that you are not going to accept it. Obviously, if your character stays home, you’re not getting to play: you are telling the DM that you would rather not play than continue to play as you have been. This is, hopefully obviously, a measure of last resort.
The best way for the wizard to defend a spellbook is the same as the best way for you to protect your precious computer files - have multiple backups.
But, if he hasn't had time to make a copy, if he knows someone is trying to steal the book back, he wouldn't leave the book in the shop overnight. He'd keep it on himself, likely guarded by as many guards as a 7th level wizard can afford to hire on a temporary basis.
If he must leave the book in the shop for plot points, he'd certainly have the book very well protected and secured. He's 7th level, so he knows 4th level spells. He might, for example, use Stone Shape to fabricate a 'doorless' safe in a wall or floor block. And he'd certainly know to keep the book in a lead box to block scrying and detection attempts. He could also use illusions to hide/conceal the book. And decoy books and safes to waste the thieves' time. And of course, a 1st level Alarm spell on the shop would work wonders. He might hire a dozen men at arms who hang out in a neighboring building waiting for the alarm to go off.
You say he can't use anything too damaging in terms of traps. Well, poison gas doesn't cause much physical damage and dissipates after a while. And while you say its illegal for him to create fatal traps, a) he may not care, b) bribes and Charm Person can get the well-to-do out of trouble, and c) dead thieves can't report you to the town guard. If you don't want to do that, you can always fill the shop with a Web.
Beyond defending his shop, since he knows there's likely going to be a break-in, he might have a familiar watch the shop from a distance and follow the thieves back to their home/inn/hideout. And when they aren't looking, he can rob them blind.
Best Answer
The Forlorn flaw from Dragon vol. 333 prevents you from gaining a familiar. As with all flaws, you get an extra feat for taking it. The existence of the Obtain Familiar feat (Complete Arcane) suggests that this is a fair trade and that the familiar is valued about the same as a feat.
For actual alternate options, from the best list of alternate class features that I know of
Abrupt Jaunt is by far the best; if allowed (and you don’t mind making your best-class-in-the-game dramatically-more-powerful), just take it unless you are a dedicated summoner (then take Rapid Summoning) or illusionist (then take Chains of Belief). The rest are... really mediocre. Some of the other immediate magic options are OK, like Cursed Glance or Sudden Shift. Instant Daze is pretty good in a campaign where Enchantment is viable, but it often isn’t.