The coaches sound like they have a good plan, what does your daughter want to do? Does she like winning at meets? Or is she happy either way? Would she compete States as a level 6? Does she want the chance to "rock States"? I would tell her to base the decision on what she thinks is best for her, not to be with friends. Friends in gymnastics are great, but they come and go. My daughter has had and lost many friends and had she worried (or I worried) about keeping her with her friends instead of the level she was better off in, she would have lost them anyway. Just because a kid has her level 6 skills (and connecting the bar routine in level 6 is HUGE) doesn't mean they need to be competing level 6. I would really think about what motivates your daughter.
My daughter is repeating level 5 this year (was solidly in the mid 34s) and having a fabulous season (she repeated level 4, too and her first year was a struggle, 2nd year she rocked). I think it has been great for her confidence and she still uptrains, so she is challenged during workout and not burned out with routines, routines, routines. She has level 6 and 7 skills, but that doesn't mean they are competition ready. I guess I would be concerned if the plan was to do no uptraining if she finishes the season as a level 5 since for my kid, she loves having the best of both worlds, competing at the level she is proficient at and training for the next level still to keep training exciting and fun.
As to the girl scoring out of level 5, some kids do that, if she has all her level 6 skills solid, why not? Don't compare your kid with anyone else, you really can't, they are not the same kid!! Doesn't mean they aren't training your kid as well, just means that all kids move along at their own rate and their "friends" shouldn't be a factor in it. Sure, they are important, having good relationships with teammates is always a good thing, but it creates much more drama than need be when you (or your kid) try to keep up with their friends. Sure, they might be sad about not moving along with their friends, but like I tell my kid, you are on your own journey, we trust your coaches and you will compete whatever level they feel you are best prepared for!