To answer your first question, no, they probably won't all be in level 10 at the same time, in all honestly, most won't even make it to level 10, and if they do, it probably won't be at the same time since all kids are different and move through the levels at their own (or their gym's own) pace.
My daughter repeated level 4 and she also repeated level 5. She was 6 her first year of level 4. For her, repeating wasn't holding her back, it was having her compete at the level she was most proficient in, while still uptraining and learning new skills. She finished her first year of level 5 with a high of 35, but she was averaging a 34AA, sure she could have moved to level 6, but she would have struggled. Her 2nd year of level 5 she averaged a 36 and had a really great season. She changed gyms, too, and has friends in the same level she is now and some in the next level. Just because some are in a different level at her old gym doesn't mean she would be. No group of kids can progress exactly together because there are so many variables, natural talent, work ethic, injuries, fear issues/blocks, etc.
If she switched gyms, there were obviously reasons, correct (unless of course, she moved away, but still, can't compare gymnasts progress at different gyms because different gyms have different philosophies)? If she is happy at her gym, coming home from gym happy and progressing in her skills, I would imagine her gym has a reason for repeating level 5? Does she have all her level 6 skills? And by repeating, do you mean she is competing level 5 in the spring right now, or have they already said she will compete next year as a level 5 too (that would concern me only because fall is a long time away and she could get her level 6 skills)? As previous poster said, need more background info to say if they are actually holding her back. She is still really young, too, there is no rush.