the National Association of School Psychologists recently reviewed the scientific literature regarding retention, and found that the majority of children do not benefit from being retained. It certainly sounds as if retaining your son would be problematic if he is ready for more challenging work, and I get the impression that you are probably not too worried about promoting him.
Your daughter's issues appear to be both school and home related. It seems that her behaviors are provoking strong feelings for you (which is not to say that the behaviors are not provocative, yet different parents react more strongly to particular behaviors). I get the feeling that you want to help her, but are finding her immaturity difficult to tolerate. This is a natural response, and probably similar to what her peers are feeling about her actions. See if you can find a way to put yourself in your daughter's shoes, or remember a tough time in your own childhood to help you connect with her a bit. She will need to feel that you accept her and that you are on her side so she can get through this tough time.
As to what may be going on at school, she sounds as if she is having significant difficulty with peer relationships. If she has at least one good friend, that is great. The research indicates that having at least one friend is an important predictor of a child's overall well being. If she does not have at least one friend, it is important to think about why this is not happening for her. She is at a prime age to be forming close same sex friendships. It is critical during these years that kids have buddies to eat lunch with and get invited to birthday parties.
Unfortunately. It is not uncommon for girls this age to begin nasty, ostracizing behavior towards each other. Such behavior can be very subtle, and may not have been observed by the teacher. If your daughter is being bullied, rejected or ignored by peers, that may explain her attempts to 'improve' herself. From what you describe, she sounds like an unhappy little girl. It is important not to underestimate how hurtful peer rejection can be, and how pervasive an impact it can have on a child. Girls can be absolutely vicious to each other because they know each others emotional weak points.
From what you describe regarding your daughter, it does not sound as if her situation would be improved by retaining her. She is more likely to experience that as a failure if her brother is promoted and she is not. Instead, I would focus on helping her by getting her some therapy. You may want to ask your pediatrician for a referral to a psychologist or counselor who can help her learn better social skills and teach her ways of making and keeping friends. As you indicated, children may often try to solve their social problems in ways that make them less attractive to others, so do not assume she understands what to do to improve the situation (even if you have tried to tell her). I recommend two books to you and one to her. For you, I recommend: Nobody Likes Me Everybody Hates Me: The top 25 Friendship Problems and How to Solve Them by Michele Borba and Odd Girl Out by Rachel Simmons. For her, books like Judy Blume's Blubber about girls having trouble making friends can really help her feel less alone.
Licensed Clinical Psychologist
Disclaimer: This post was written for information purposes only. It is not intended to take the place of face to face psychological or medical care. The information in this post is not intended to create a patient clinician relationship, nor to give or rule-out a diagnosis.