I am a teacher who was trained in Foutins and Pinnel. Here's my post about why I love it:

http://teachingmybabytoread.blog.com/2011/03/01/the-three-types-of-reading/

The principal of Guided Reading groups should work great for gifted kids who are mainstreamed in a classroom, because the idea is to make sure that each kid is in the correct Guided Reading Leveled group. The problem with the dd7 first grader reading with second graders is that she really should have been reading up in the third grade or fourth grade class. It sounds like the teacher did not have her at the right level.

You can figure out on your own what Guided Reading Level your child should be on, (although really, the teacher should be constantly assessing this and telling you). Here's how: http://teachingmybabytoread.blog.com/2011/03/01/guided-reading-levels

Once you know what level your kid should be at, you can double check that he/she is in the right group.