I'm pretty sure that the "break-even" number for pupils in a class to pay for a teacher is 28. I know that that used to be the case in my LEA, but it may have changed. It will also vary from LEA to LEA as each LEA is paid a different amount per pupil. Eg. the LEA I work in is paid approx £300 per pupil less, per year, than one of our neighbouring LEAs. Our overheads are the same, but we just get less money to work with. Tis absolute madness.
Perhaps she means that 25 pupils is "perfect" from a teaching point of view.
I am concerned that the basic problem lies with the teacher, and her inability to teach mixed age classes. I love teaching mixed age classes, but they do take more organisation, and thought than a single age class. In an average single age class, I used to differentiate every piece of recorded work into three ability groups (plus addition for either SEN or G&T). With a mixed age class, that doesn't double to 6 groups plus G&T and SEN. With a mixed age class, I used to differentiate 4 ways, plus SEN & G&T, because there used to be a lot of crossover in the middle.
It absolutely should not be up to you to let the teacher know when your dd is ready to move up a reading level. The teacher should be aware because she is hearing her read on a regular basis (weekly).
If they split the 54? KS1 children into a Rec/1 and 1/2, then there should be 27 in each class. This is absolutely manageable, particularly with a TA half of the time as well.
What the school are doing at the moment with 35 children in a class is illegal as far as I know, and at best, dishonest and ill thoughtout (ie. running two registers, but having half of the children taught by a TA).
I really think you need to raise your concerns with the governors and if necessary, the LEA. However, time is of the essence. You need to get a move on with this and get some answers before half term.