I would agree with Graciesmansion that exams are not the 'be all and end all' of potential and ability in dance.
However, good, rigorous teaching of correct technique is absolutely essential - and if your plan is for your DD to be taught dance locally until 16-18, then you need to be assured that the teaching she is getting at the moment is a) a good foundation for that and b) going to get her to the correct standard for auditioning at that point.
It seems to me - though may be wrong - that a child who goes to vocational school at 11 can 'unlearn' issues from previous teaching, or 'catch up' missed technique rather more easily than a dancer who starts full time dance training at 16-18 with many more years of local teaching behind them. In some ways, I think an exceptional dancer with few years of good lessons in a particular genre e.g. ballet (e.g. KatyMac's DD) might be better off in this respect than a dancer who has had many, many years of not great teaching.
How many students from this dance school go to dance college at 16 and 18? Which colleges do they go to? Have these stuidents always danced at this dance school, or have they moved from elsewhere later in their training?
Regardless of the 'level' of exams reached at a particular age, what is the range of marks like? A high proportion of distinctions might indicate (though does not guarantee) that the teaching is good, even if the pace is slow.
When you see your DD performing at a festival, what type of festivals are these (All England? Other? There is DEFINITELY a pecking order...) What genres are the dances your dance school presents, and how well do they do? Do they win the ballet classes? Or are there other schools that have clearly better technique?