Leaving aside the question of appropriate grade placement for a moment...before you expend too much energy agonizing, I would confirm that this would actually affect her nominal grade placement. It is by no means unheard of, or even all that unusual, for age-typical students to "play up" in invitation/audition-only sports, music, dance, arts, etc.
It's like the freshman who play on the varsity team. No one thinks it makes them ineligible for competing as ninth graders in other areas, or for playing all four years of high school.
