Our DS has a heart condition which means he's a slow runner. Every year he would come in last in his primary school. He did tell me that he didn't like coming last but never asked to be withdrawn or to have the day off and I never offered.
We did talk about the fact that someone has to come last - that's the way with most things in life. Academically he's top set and we pointed out that some of his friends had problems with maths/reading etc which he found easy.
At his heart check one year we encouraged him to tell the consultant about the coming last business. His consultant said 'someone with your heart condition should get a gold medal just for walking out on the field. Exercise will help us judge how well you're doing - if you get breathless more quickly than last year, we know something is not going right'.
Our DS was listening to 'Waterloo' in the car one day and picked up on the 'I feel like I win when I lose' line. That became his mantra. We'd sing it on the way to school, he told his friends he was going to come last so they didn't! And he kept his word every year by coming last and would take a bow!
Fast forward to secondary school and practice for the sports day there. He came home beaming. He'd come second to last in the practice. Made his day and showed him that not giving in pays off eventually. He wasn't fast enough to qualify (which also made his day as he hates sport so had a great time cheering on his faster friends in their heats).
The point is that, if you take him out this time, when does that stop? Next year? Three years time? Never? When does he find out he is getting faster or better at things? When does he get the pride of being 'second to last rather than last this year' if he never takes part?
It's not about resilience. It's about learning that some things in life just have to be done whether we like them or not. Taking them out of sports day is fine - I don't think it's an important thing. But is that rule going to apply for the rest of their school days or are you going to have to bite the bullet at some point and say 'sorry love, you've got to go in' when they're in secondary school and they have practice heats in every PE lesson for a month. Because they don't just miss the 'humiliation' of practice - they miss maths, English, geography or whatever else they've got that day. Or do you have them having a 'hurt leg' and sitting out. Because the other kids will figure that one out over the years and they'll get teased about that!