Agree this is common before state - if your kiddo needs a bit more targeted practice on her routines, that should tell you the coaches are paying attention. I know it isn't fun to miss out on upgrades but they won't do your gymnast any good right now anyway. I think it's odd they are just now addressing it though.
That said - yes, favoritism exists. I've seen it at both gyms we have been at. I think favoring the talented kiddos might be one thing but also coaches favor the girls whose parents stay out of the gym, girls who easily take corrections, the girls who are always hard workers, etc.
We also have split practice groups at practice and there is sometimes hurt feelings over this. The more advanced 7s will practice with the 8s and the less advanced 7s stay together. There is a handful of 7s that float between the two groups, one being my daughter. She knows now that her placement in the following practice has everything to do with the practice prior. Did she fall off the beam multiple times? Did she make it through her customized drill plan (each girl has their own based on needs). Did she chitchat too much? etc etc.