"We are so excited to give your daughter this wonderful new opportunity to do many fewer hours with less intensity! It will give her exactly the chance she needs to really flourish!"
This is a load of nonsense. The gym is really telling you that they don't want your daughter for team, but they want you to stay so they can keep making money off of you. They are just trying to make it sound positive. Even if you were to argue her way back onto preteam or team, there is nothing you or your daughter could ever do to erase the perception that she's not really team material. Without necessarily realizing it, the coaches will always perceive and treat your daughter differently, and there will be negative effects. If she wants to be on team, ever, you need to move her now.
I heard exactly the same thing from my daughter's gym. After she has been training 12 hours a week, competing JO for four years, owning a team season high event score, contributing to the team score in every meet, and regularly standing near the top of the podium on multiple events, we are going to give her the exciting opportunity to train XCel for 6 hours a week with no conditioning and second-rate coaching! This is exactly what she needs to realize her full potential! I picked up her
grips the next day and within the week she was training a higher JO level at a new gym.