Research is all over the map about levels and grouping - seems to help high achievers but can hurt lower ones, although none of it is perfectly clear, if you ask me (and I've been reading the research in this area a ton lately as our school district revisits levels). However, there is some good research on cluster grouping, that suggests it helps the not highest group kids too, because it creates a chance for new leaders to emerge (maybe this is one of the articles posted by SL9): http://www.gifted.uconn.edu/nrcgt/newsletter/spring96/sprng964.html.

Be careful when you get into the leveling/tracking/grouping research - because it is very nuanced and if you read just the gifted research it will seem as though everyone agrees that it helps G/T kids, but don't talk about the effect on lower achievers (which makes sense, in that it is G/T research, but won't be very convincing to your district perhaps). You have to look closely at how the groups are formed, how broadly, how flexible, how often regrouped, etc.

A good bibliography is here: http://www.gifted.uconn.edu/sem/semart11.html

Good luck, I hate to say it, but there is no substitute for just sitting and reading the studies.

Cat