Good advice above. Also, think about the difference between 2nd grade reading and 4th grade reading: in 2nd, children are working mainly on decoding, and a very little bit of literal comprehension. By 4th grade, they are all supposed to have mastered the fundamentals of decoding, and are now working on expanding higher-level reading vocabulary, literal comprehension, and the beginnings of inferential comprehension. The rate of growth (measured, keep in mind, by not-very-scientifically-determined levels in a reading program) shouldn't necessarily be as rapid. One always hopes to see a little more improvement, but she didn't truly stagnate from fall to winter (essentially maintained her percentile, and picked up 5 scaled points). She is also still a full standard deviation above the mean of the class, which roughly translates to functioning nearly a grade level ahead of her placement (which I would view as falling in the optimal range for grade-advanced students).
In what way do you feel that she is not where she should be in reading? Are her grades not good? Are comments coming home from the teacher regarding not comprehending, or not keeping up with class expectations? Sometimes, as parents, it can be hard to get a good handle on what "should" looks like, because we don't have a wide enough perspective on "normal". (Case in point: SO thinks our youngest child doesn't have a good sense of pitch. We went to a very respectable student recital this weekend, after which it became clear that, in comparison to a wider sample of children, that was not the case!)
A few other thoughts: very little is irreparable. There are many paths to equally satisfying educational (and life) outcomes. Reading, in particular, is one of the areas where extracurricular self-education is as important as (or even more important than) formal education.
But I think the most important consideration here is actually (and I am trying to say this as gently as possible) the distance between you and your spouse regarding this parenting decision. For most children, almost any non-abusive schooling situation will be at least bearable, as long as her parents are united in supporting her through it. If she senses the discord between you regarding her education, the risk is high that she will begin to believe that she is the cause of conflict between her parents, which, I need not say, will be far more damaging than anything an educational mismatch may do.
Please believe that I am not judging you--we've all found ourselves in situations where we've cared so much, or been under such stress, or been so exhausted, that we've lost perspective. I do encourage you to take a step back, find some time to have a private, uninterrupted mutual listening session with your spouse, and get on the same page. It is apparent that you both care deeply about your child. Start from this point of agreement, and you will, given enough time and listening, be able to find common ground.
