Thank-you everyone for the great advice. My husband and I discussed it and have decided to definitely move her up to 1st grade. She came home today with a "reading" assignment which consisted of the letter "H" book with words that start with "H" on one side of the page and a picture of the word on the other page. She said, "Mommy, these are baby books I am going to ask Ms. H tomorrow if I can have harder books".
Yes, when we saw her reading book today it helped us to make up our decision. I just can't see her going through the school year with such little challenge for her.