Selecting by body type alone is a privilege some coaches have had. I have personally worked with a coach who has a tremendous amount of knowledge and experience, but who has been privileged to be able to work with the creme de la creme. My gym is in a limited talent/gene/geographical pool.
. I don't have the luxury of turning kids away simply because they don't fit the "mold" of ideal competitive gymnasts, and luckily my gym is really inclusive. We had one L10 a few years back that I became close with and I told her several times what a wonderful role model she was to the younger ones because she didn't have that stereotypical gymmie look and she did just fine.
If body type alone was a determining factor, my own DD would certainly not be in gymnastics. In regular life she is by no means big but she is slightly more compact than most of her teammates, definitely more Shawn than Nastia..!
Now... I would think about what the coach is telling (and not telling) you. It sounds as if this particular coach has made up his/her mind that your DD doesn't necessarily have what it takes to cut it at your gym, for whatever reason.if her body type is being used as an excuse, look around and see if you can find a more inclusive gym or take a look at the team gymnasts at your own gym. If there are all different types, then obviously they made it "through" this coach, right ? If they all fit the same mold and your DD does not, well there's your answer, no future at this gym...
If there are various types on team, consider what the coach might be telling you. Could (s)he be taking the easy way out and "blaming" your Dds body type rather than tell you plainly she doesn't have what it takes? I obviously don't know your gymmie at all, I'm just brainstorming and trying to figure it out. Find out the path to team and go further, take her to the next team evaluation or whatever. Speak to the team coaches if you can.
As a coach I'm not into mind games and I will straight up tell parents if I feel their child would not have a future in. Competitive gymnastics. I have had to have that conversation, only a couple of times, but it's never easy.