*Disclaimer* I replied to this from the quick links on the homepage, before realizing that the OP had posted in the PARENT's forum. OOps, sorry! If the mods want to delete/move it, I understand, but I was really only trying to help-out Emorymom.
I am a coach at a gym that starts competing at Level 3, though some girls enter the team program at Level 4, or transfer later from other gyms. We do not compete Level 2, although our pre-team trains similar skills. From my experience watching our gym and those that DO compete Level 2 AAU, I have seen both advantages and disadvantages of both systems. If Level 2 is competed, just as a progression to be got-through, until the kids reach Level 3 or Level 4, I do not see much point in it. If however, it is used as PART of a bigger plan for team progression, it can have benefits. To do REALLY well at Level 2, the kids need to have solid skills and GREAT execution, which can really help them through all the compulsory levels. However, if just scoring OK at Level 2 or 3 is just seen as an end unto itself, it will not help the long-term development of the gymnasts. They need to also be working on new skills as well as perfecting routines.
I have seen many Level 3 and 4 gymnasts that can DO the skills, but either with terrible form, bad technique or sometimes both

. Having to compete at Level 2 with easier skills (in a good gym!), could prevent some of those problems further along the levels. As a coach, it is MUCH easier to teach a skill the right way with decent form than it is to try and correct a kid that believes they HAVE a great round-off or back-hip circle! To do even those skills correctly, the child needs a good hollow shape (which they can hold), and for R.O. an excellent cartwheel with straight body, and the ability to fully extend the shoulders and push through them.
If I were the OP, I would look at the gyms nearest you first (Atlanta area?). If they DO compete Level 2 AAU, check out their meet results online. Are their kids consistently scoring 35s and 36s? How old are the gymnasts? How many of their top scorers are older or repeaters? Any decent gymnast should be able to score 35+ as a 2nd year Level 2/3/4. If more than 1/3 of their level 2s or Lvl 3s are repeaters, and are NOT the youngest kids, that would be a red-flag that this is a gym that cares MORE about winning than progressing their gymnasts. You want a balance. Some kids DO need to repeat OR be in a less demanding program, but scoring 35 or 36+ regularly shows a decent mastery of that level.
If you are in Ga, check out the GA aau gymnastics website. The Level 2 and Level 3 state meet is this weekend in Winder, GA. The schedule is on the GA AAU website. See when the gyms you are interested in are competing (try and pick the session or sessions that have the most relevant teams), maybe you and your DD can go "watch" the meet! For her it could be a fun experience, and for you, you can scope out the gyms, how they do and also how the coaches interact with the kids.
I hope this helped. If you have any questions lmk!