It was certainly insensitive but likely not done purposely. If I were in this position, I would email whoever was in charge of the mess to explain your disappointment and request a meeting to clear the air. It appears that they are thinking your dd will repeat 6? - not moving her to the upper group with all the other 6s, keeping her with the kids who will be competing 6 this coming year, not scoring a 35 all season. The coach saying she is the weakest of the upper group and strongest of the lower group suggests to me that they would prefer to give her another year to gain more confidence - maybe lead the lower group, before moving to 7. That's not a bad thought process for many girls, who would benefit from a "winning" year. I would want clarification on that. You really don't have a choice of another gym unless you are willing to drive 2hrs+ each way and as a L6/7, no way would I even entertain that thought to your dd, who just may jump on it if she likes gymnastics enough.
Here is another thought on the matter too - It appears that your gym only goes to L8? Are there plans to go higher? Are the coaches capable of it? How do the L8's do in competition? If your dd is already a L6, she doesn't have many more years in this gym if they don't train upper optionals. If your dd is already on the fence about gymnastics, I would be wondering if now is the time to cut loose and find another option for her that may allow her to use her favorite part of gymnastics: dance, diving, T&T, etc. Even parkour.
One last bit - the Switch to L6 being considered an optional level is only a few years old. I know as a parent coming up the ranks, it's natural to think of it as "she made it to optionals!" but for coaches and parents who have been around a long time, it is easy to slip back into the L7-10 mentality. Many still feel it isn't "really" optionals because it basically is the same level as L5. So it really is a prep-to-optionals, which is why it was made and why it is not required. You get a feel for some of this in posts on CB and how parents/coaches react to L6. All that can play a part when gyms, coaches, parents think about their "optional" team. Often times, they are still thinking 7-10 and 6 is forgotten about - seems to be this little island (hopping stone) between compulsory (or xcel in some gyms) and "true" optionals. With some gyms, the cut off is L8-10, where the coaches view 6/7 this way but If the girls have made it to L8, they have the drive/talent to make it to L10 and deserve that little extra recognition. Not saying that is what is happening in your gym, but with all the 8's being recognized and not everyone in the lower levels, it's just a thought.
ETA: I just want to be clear that what happened is unacceptable and thoughtless. I am not a believer in "everyone deserves a trophy/medal/ribbon" at competitions. But that is very different than a team banquet, where the purpose should be to recognize everyone's efforts regardless of achievement. The coaches likely didn't realize that your dd was not in any of the score groups called up, but they should have. When doing these awards where *everyone* is being called up, it's important to make sure no one will be left sitting. And BTW - 4 hours? way too long. I believe ours is 2.5 hours including a meal, 15 min slide show and all the awards including silly ones that take 15-20 minutes on their own - oh and senior recognition which can go on forever with lots of tears depending on who is graduating.
