choclatespiders:
I can understand your surprise (or even shock) at hearing your daughter is being taught in a cloak room, but there may be method to this.
I'm not sure what year your DD is in, but usually cloak rooms are for reception. Certainly most KS1 classes at reading time can be very noisy and chaotic places, this can be very hard on children who are struggling.
It may be that what is happening here is the teacher or teaching assistant(s) are taking this group out of the hub bub into a relatively quiet place so that everyone can hear clearly, there are less distractions and as a group they can settle down to focus on reading or writing.
I suspect in an ideal world they would be taken to the library or a learning support room - but many schools just simply don't have that kind of space (or if they have the space it might be heavily in use - i.e. library for class library times/ music lessons & hall for PE/ lunch/ etc...). I rather suspect they're trying to create a quiet learning space with the limited resources available to them.
Talk to the teacher - but also give it some time. You may find once the weather is better in the Spring, they take this group outside. I also think if your daughter is being moved down a group it would be worthwhile finding out what the teacher thinks the problem is, and how you can help at home.
Learning in a cloakroom may not be ideal - but if the result is that your child is getting patient, uninterupted support to help her at this early stage, and whilst she appears to be struggling a bit, perhaps it isn't such an issue.