I have a dd that just finished competing L4 as a 10 year old, so this issue is close to my heart. She didn't set foot in the gym until she was 9, and is competition ready for L5 now (season starts in the fall). She'll certainly be the oldest on her team next year, but that's fine with her. She's naturally talented, but has some fear/anxiety issues that have kept her "back" (weird to use that word when it's only been 2 years, but she's the one who wanted to compete at L4 instead of L5 this year, not her coaches). Our gym used to shunt kids like her into PrepOp, but luckily they changed their policy last year; now it is an option for most, but age is not THE limiting factor to being offered a spot on JO. She does really well in competition, is a perfectionist and a hard worker, but knows she'll probably never get to L10 at this point, and again - she's okay with it. I do have input on a few issues you brought up though:
About being "stuck": I've learned in our 2 years (and reading this board for the past year) that it is VERY normal to go through periods where it *seems* like no progress is being made, and then they'll make a few leaps all at once. I think especially at the younger levels, natural talent can take some kids pretty far fast, but then they hit a skill that they really need to work at, or have fear, or just need to focus on building up strength for a while. It's normal to go many months without any new skills being acquired, but that certainly doesn't mean nothing is happening. The more the basics are perfected, the better new skills will be when they get them (at least that's what I've gathered). You can't judge progress over a few months, you really need to look at a longer time frame than that.
About it not being "worth it" if they're not going to go "all the way": I've sort of read between the lines on a lot of posts here, and it almost seems like people are saying, "if they're not going to make it to elite or college gym, should I pull them out now?" (and this being asked at ages younger than 10). People respond with, "Well, so-and-so started at age 10 and made it to the olympics", thinking that is comfort. My question is this - is it REALLY only worth it to compete in this sport if you are going to make it to L10 or beyond? Is there nothing to be gained by working hard, having fun, and getting to L8 at age 17? Or quitting when you're 12? Why do parents feel that if their child won't be a superstar, then it's not worth the time and money? For kids who love the sport, gymnastics is excellent exercise, a lot of fun, and a great place to learn plenty of life skills like dealing with competition and stress, hard work, perseverance, discipline, self-confidence, teamwork, performing in front of a crowd, losing with grace, how to get back up after you fall off, and... I could go on and on. If the child has the drive and the desire, and you have the money and the time, let her do it. (...in my not so humble opinion!)