I'm not a huge fan of the CogAT but that may be colored by our own experiences with my out of the box ADD child testing much lower on it than on IQ tests and us being told that it proved that her IQ scores were due to good guessing. That aside, the publisher does recommend that kids who are suspected of being gifted be given a higher level b/c it has more head room.
I believe that the explanation I've read from the publisher is that it is easier to get a higher score when tested above level on the CogAT b/c you don't have to get nearly every question correct in order to get a higher score.
The only major drawbacks I could see in having her take the 3rd grade level is that it is timed starting in 3rd grade and she has to read it to herself. If she isn't a fast kid, the timing could be an issue and if reading is impacted for whatever reason (not being a great reader yet, reading something into the question that it isn't asking, etc.), that could potentially lower a score.
