From a personal standpoint, I would have my girls repeat level 4 (USAG L4) for a few reasons:
1. Missing a backhandspring/missing key elements that are building blocks for future skills.
2. Improper technique on important skills (back hip circle on bars, bhs on floor, vault, etc)
3. Maturity--if the kids are consistantly scoring low and do are not mature enough to move on to the next level. For me, this point is mainly a safety issue because as the levels progress the skills become more difficult, and if the gymnast is not mature enough they will end up hurting mentally and physcially.
Repeating a level generally occurs for many reaons, such as missing key elements, immaturity, improper technicque, etc. I am a perfectionist, so I like to see that my gymnasts are able to correctly perform a skill consistantly before advancing them. As far as how common it is to repeat level 4, I think it really all depends on the gymnast. There are some skills at level 4 that give the gymnast trouble, but there are skills at every level that present problems. If everything came extremely easy to every kid, there would be no competition and no overcoming obstacles.