Regarding entering children for L2 and L3 at the end of KS1, I thought the teacher could only enter them for ONE paper, based on their previous performance....so either the higher paper (L3) or L2. If I am correct, your child was judged to be L2 based on teacher assessment, which is the most important aspect of the overall judgment, and so put in for that paper.
Even if they had taken a L3 paper and achieved sufficient marks, unless they performed consistently at that level in class, they would only get L2. So I think you might be placing too much emphasis on the test.
And by the way, when was the assessment taken which showed just one sub level below the end of year target? Perhaps it was early Oct and so actually your daughter has made early progress towards her goals.....or was it a test administered at the start if Sept? Again, unlikely that the test alone is used to assess current performance or set targets.
The school will be assessed against her achievement at KS1, so 2 sub levels above whatever that was, would be a normal goal.....not a fudge to make it easier. Achieving 3 sub levels in a year at KS2 is meant to be very hard.
And of course, all of this relates to the old system which is now defunct for years such as Yr3, but which many schools still seem to be using.
Is there a primary teacher out there who can confirm if I'm right that pupils can only be put in for one paper at the end of KS1....or could, under last years system?