Second grade teacher here. In my experience kids tend to stay at M/N for a very long time in some cases. Even if kids read fluently, they do not always get all the nuances, jokes, foreshadowing, etc. The books are complex and it's all about comprehension, vocabulary, understanding characters, plot, etc. I would not push to get your child in second grade for reading yet. She can apply a lot of what she will learn in first grade to her higher level books. For example, if the lesson is "Look for the small word within the big word to help you figure it out (i.e "in" in "printer") she will still use that strategy to figure out difficult words in her books. I'd say, give the teacher a chance and keep in mind that the first month of school is a lot of review.
