Here's my analysis of the situation: these little competitions have all the gloss of a casual friendly chat, but under the surface, there's a lot of stress going on. I presume that they're driven by one-upsmanship in a strange hierarchy-by-proxy, where the kids are the unknowing competitors and the parents are the proxies for them. It's all built on a foundation of insecurity.
If I may play the armchair psychologist role for a bit, I'd say that I agree with your analysis, but that there's a whole other level of stress and insecurity involved as well. As parents we're forced to make it up as we go along, and I think most of us realize we're screwing up in certain ways. But unless one of the parents works directly with kids in the same age group as their own children (teacher, coach, psychologist, pediatrician, etc.), we don't have any sort of frame of reference for what's normal, we only know about our own kids.
So, one way for a concerned parent to get a progress report on themselves is by surveying other parents of kids in the same age bracket. Thus, "What level is your child reading at?" becomes a proxy for the real question, "How am I doing?", with all the anxiety it implies. The parent who asks this question is wondering if they're doing enough to help their child develop. If you drop the bombshell that yours is reading at level T, this parent experiences two visceral reactions:
"OMIGOD, I'M A TOTAL FAILURE!"
and
"That parent is EVIL, because I'm pushing as hard as I can already, and if I pushed my dear child that hard, there would never be time for either of us to sleep!"
This concludes my armchair psychology session, which will do as a distraction until the NFL season resumes.
