The official levels in my son's first grade class certainly looked more even at the end of the year. When the group reached the desired level they were given no further instruction or testing. The extra time was used to give extra instruction to the lower groups and push them faster. Hey Presto! Evening out.
This was also our experience. They try to get all the kids to the same level. Children who are ahead of the "desired level" are not given instruction in order to keep learning, but stay at the "desired" level. Eventually the other kids will "catch up" as they are still learning, and the children who are (or were) ahead, are not.
