We're restructuring but the new org chart has me reporting to an associate prof, instead of an equal-ranked full professor. Is this defamatory or typical?
Universities are not like the army, in which your commanding officer is always someone of higher rank than you.
For instance, it is common for an academic department to have a chair or head who is drawn from among the faculty. Many (most?) universities allow an associate professor to serve as chair (some would even allow an assistant professor). In such cases, an associate professor can certainly be the "boss" of a full professor.
I don't think there is anything unusual or worrisome about the proposed organization you're describing.