Grinty,
Thank you so much for your advice! Our school does not have plans to test our twins, but we agreed to meet with the administrators after the first few weeks of school once they have had a chance to assess them in the classroom. Per your recommendation, I can ask to have them tested at the school. Consideration of the functioning of students in other grades is a good point, since students at the school do function above grade level on average.
The recommendation for 3rd grade placement in reading came from their tester, an experienced PhD in early childhood education, who felt both twins were gifted. She felt DS had hyperlexia type I since he is "neurotypical" (although, who is, really?

)
http://www.wisconsinmedicalsociety.org/savant_syndrome/savant_articles/hyperlexiaDoes anyone have experience with what happens to hyperlexic type I children later in school? He likes math and numbers too, just not to the same extent.
DD was more erratic with her testing but scored similarly on some tests and below her brother on others. The twin thing is so very tricky especially with respect to education. We very much share your philosophy about individual needs but it is not easy. Does anyone else has experience with twins who are somewhat discordant? I could definitely foresee a grade skip in the future for DS were it not for his twin.
Have a great weekend,
Dee