There seem to be 3 distinct issues under consideration in the OP:
- class size (20 was OK, 26 is not)
- teaching style
- grade level placement

Originally Posted by Tigerle
I do not want DD6, who probably reads at a third grade level, in the classroom with up to 26 not or barely reading first graders...
In a way it seems as though the decision for whole-grade acceleration has already been made, is the best fit (or least-worst fit) among the options currently available, and is supported with the mixed grade-level classroom. This could be a cake walk.

If you want further individualized consideration and/or assurance as to whether a full-grade grade acceleration is appropriate for your child, there is always the Iowa Acceleration Scale (IAS).