I'm still really confused! Some schools talk about mixed ability classrooms for everything - so then some schools don't have mixed ability classrooms, they 'stream'.
You are still confused with the fact that "streaming" means children, who are considered "bright" are all taught in the same class and those, who are considered "not so bright" are also all taught in the same class. They would be taught everything together in that class and not move,...even, if one of them might be really clever in one area, i.e. Maths or reading, they'd still stay in the lower class, if that's what they'd been allocated to.
For "setting", children are in mixed-ability classes, but they get split up and perhaps go to a different room, if they are very strong at phonics, or perhaps need support in Maths. After that session, they go back to their mixed-ability class.
What happens in most primary schools is that children are in mixed-ability classes. The teacher or LSA pulls them out for specific small group work. This is similar to setting, but a lot more flexible. So a child, who is very good at number work, might work in the "more able" group one week, but perhaps struggles with shapes and therefore then works with the "average" or "support" group in that week.
What are the pros/cons of either approach?
"Streaming" possibly makes management and timetabling easier. It's a ridiculous approach for a reception class, though, since children develop in different ways and at different speeds. I'd also consider it a silly approach for most of primary,...and indeed secondary schooling. It assumes that a child, who is strong in one area, will be strong in everything else and that a child, who is seen as academically weak in one area, is incapable of showing strengths in other areas. It can be harmful and might limit children's potential, aspirations and opportunities.
"Setting" is helpful for teachers, because they tend to have less of an ability gap in their lessons and therefore don't need to try and differentiate at such great lengths. Again, it doesn't take into account for example that children might be good at number, but less good at shape. Depending on how schools set, certain subjects might be linked, so someone, who is very good at Maths is also assumed to be very good at Science and put into the top groups for both. Someone, who struggles with English, therefore might get put into a lower set for History, despite perhaps being very good and having a high level of understanding in the subject.
"Mixed-ability", in the way most schools use it, works on the idea of differentiation. It means children work in ability groups, but these are supposed to be fluent and flexible (not all schools work that way, though, I appreciate that). So, if a child, who is usually very able in Maths struggles with a particular concept, they might move to the lower group to support their understanding while this concept is being covered. Someone, who has proven that they have understood something more quickly, gets moved up and challenged further for that week/lesson.