I agree with SurpriseGymMom, without knowing your gym or your DD, nobody can tell you, so you are better off asking the gym. I would also ask them if mobility into JO later would be possible (some gyms do NOT allow this, but others are willing to let a girl transition to JO if she demonstrates ability).
IF you are satisfied with their answer and choose to stay, Xcel CAN be a good place to start in competitive gymnastics.
It sounds promising to me that they refer to is as the COMPETITIVE Xcel program. It should mean that they treat Xcel with respect.
As for Xcel not being a good path to college gymnastics, I have a few thoughts:
1. Xcel has only been a National USAG program since 2013. This has only been the 5th season of the National Xcel program. There were various versions of Xcel (called by different names throughout the country and having different requirements) before that. In 2012, each region set up their own Xcel program prior to Nationalization, but the rules in the different regions were all a little different.
2. Based on the skill limits in Xcel Diamond currently, a gymnast would most likely NOT be able to go directly from Xcel to NCAA D1 or even D2 gymnastics, BUT D3 might be a possibility... s would college CLUB gymnastics.
3. A girl could start out in Xcel and transition into JO later. There is a mom on here whose DD started gymnastics later, but competed Xcel Bronze and Gold and then transitioned into JO and might possibly compete L8 next season if all works out well.
4. In Xcel, a girl can skip skills that are a PITA while still getting higher level skills. No shoot through or mill circle (L2 and L3). No Front Hip Circle (only L3 now, although it used to also be in the level above). No REQUIRED choreography. Routines can be designed to suit the gymnast's strengths while minimizing her weaknesses.
5. In Xcel, girls can add in upgraded skills once they are competition ready (within skill limits allowed in each division). My YG (age 13) competes Xcel Platinum. On Floor, she can compete a Roundoff-Back handspring while working on her Front Pike. She HAS the front pike, but is not solid in it, so she can swap it out if it "is on vacation" during a meet. Next season, she will probably compete Platinum again, but after that, she will likely go to L6 or L7 - depending on her skill acquisition in the next 2 years. She could still possibly make it to L8 or L9 before graduating high school... and this is with a low hours program (7.5 hours a week, of which she often only gets to stay 6 hours)