Glad to hear your meeting went well. It is wonderful that your school has a precedent for a grade skip and is open to being flexible. A few thoughts about your questions:
Our younger daughter is physically small. She gets very annoyed when people assume she is younger. How would older kids deal with her if she goes to their class?
If she gets annoyed when people think she is younger it may be that she feels uncomfortable with her size. Is possible to talk it up? Becoming comfortable with being petite may be important for her self-confidence. "Good things come in small packages." The older kids will most likely wonder if she is younger, and if she reacts emotionally or negatively she may experience difficulty in being accepted as a classmate and peer. If she learns in advance from you how to answer questions about her age and/or stature with grace and aplomb, she may win many friends.
She might end up in class with her older sister (or older sister's friends). Older sister already expressed surprise that younger one is doing the same math work (and older sister is in AG math... How do siblings handle their kid sisters or brothers moving into their grade? Or I should ask, how do parents help their kids handle this?
Sibling rivalry is a form of competition and when in the same grade, may extend to friendships. Younger sister's friendship skills may begin to impact older sister's friendships and may even begin to reflect on the older sister. You may wish to think ahead to how you'd handle situations such as one daughter being invited to a birthday party if the other is not. Ultimately each daughter needs to feel secure in the knowledge that they are loved, equally, are unique individuals, and have different needs. Encouraging them to talk openly about their feelings with you and with each other, rather than acting out, may be helpful. Many girls and moms have enjoyed
The Feelings Book by American Girl. Other titles include A Smart Girl's Guide to Liking Herself, and several books about friends and friendship.
