Yep, she would have to wait until fall 2019 and she will be 8. I don't know why they have to decide now but that's just the way they do it at this gym. I was thinking the same thing, maybe she'll be ready in a few months but since they've decided she will wait they aren't working on getting her ready, if that makes sense.
The age range for pre-team is 5-8 but I don't know about level 3, since we're not there yet (and apparently won't be for some time). It's all a little mysterious but I think it's pre-team to JO, I don't know anything about Xcel. Actually I think there's a separate Xcel pre-team track.
How long has your DD been in gymnastics? How long on pre-team?
I have seen your situation go a number of ways....
1) Athlete really does need the year to build strength and conditioning, and the pre-team time spent on basics prior to L3 is exactly what helps her have an amazing L3 season a year later.
2) Athlete is tracked into Xcel after waiting a year on pre-team, and is shattered because she thought she was aiming for JO and coaches weren't clear that this was a potential (or more often, probable) outcome.
3) Athlete is tracked into Xcel and is perfectly happy about that as coaches were clear on expectations and gym treats Xcel favorably.
4) Athlete spends another year on pre-team and is told she needs another year on preteam after that because she still can't do X, Y, or Z. (This really happened to a 10 year old girl I know at a 'top' gym! Kept her on preteam for 3 years dangling the carrot of JO!! then finally after 3 years said she is too old now and only Xcel is available!) Mom eventually switched her and she is competing L4 successfully at a more inclusive gym. Ugh.
In all of the above scenarios, coach communication is #1. You need to understand, as best you can, what your daughter needs to achieve to be accepted onto a team (either Xcel or JO or other if applicable to your region). Then you need to have a mechanism to check in on progress every few months or so. Is she making progress? Do they expect her to be ready for the targeted team in time? Any concerns with her progress?
Sometimes, these 'top' gyms can string kids along who aren't standouts. I can't say whether they do it on purpose to take your money, or just don't like the 'tough' conversations with parents that their child just isn't really what they are looking for. Being at a 'top' gym can be a blessing and a curse.
So definitely be friendly (not too pushy, but insist that coach can be honest with you about outlook) and get more facts and insights from coach.