I have been through the early kindergarten issue, so I'll let you know my experience. My older duaghter's B-day is 10/5, and the state's cut-off is turning 5 by 9/1 to start kindergarten. I wanted her to be in Madison School District, and they will actually test any kids with B-days between 9/1 and 10/1 for kindergarten, so we missed their cut-off by only 4 days. My daughter had been reading since 3 1/2 years old, and was very academically ready, but many people cautioned me about her emotional readiness, and worried that she might fall into more of a follower role because of her youth. I was also at home with her fulltime and she had never been to pre-school at all, but she has never been shy.
Anyhow, we decided that she really needed to start school at 4 years old. I just worried that if I kept her out until she was nearly 6, that she might be bored in kindergarten. I found Montessori Day School Public Charter (at 14th St & Dunlap), and they were willing to test my daughter, and found her to be ready for kindergarten. She did very well in kindergarten, and even though she is a little younger, she remained assertive and a leader. I didn't initially tell her that she was starting earlier or that she would be younger than most of her class, though. Though she has now figured out that she is a little younger than most of her classmates, I didn't want her to go into kindergarten worrying that she was littler or anything. After kindergarten, we moved her to Madison Simis for first grade, and she did great there. She reads and does math above her grade-level, and was put into their enriched learning classes for those subjects. At the end of the year, she tested into their gifted program for 2nd grade, so we are getting ready to start in the gifted program this fall.
I honestly believe that we made the right decision in starting her early. She has been with kids who abilities more closely matched her own. When she started kindergarten at 4, there were more than a few kids who weren't reading at all. Even though she was in MOntessori, the class also worked as a group, and they "introduced" letters and sounds to the whole class thru ZooPhonics. On one level, my daughter enjoyed the silly rhymes and songs that she was doing, but she also voiced frustration, as a good little reader, at having to sit thru being told what a "B" is and how it sounds.
If I were in your position, I would be concerned about boring my child by making her repeat material that she has already been thru. My daughter is also very sensitive about being referred to as a second grder, and NOT a first grader. She has already been thru first grade, and she wants to be recognized as such. I honestly think that you shouldn't under-estimate the potential stigma of being "held-back" even if your kid would actually be back where she originally should be.
Many people have voiced concern to me about a younger kid falling behind socially, but I'm actually glad that my girl is on the younger side of her school peers, because she is pretty assertive [read: a bit bossy :)]. If she were on the extreme older side of her classmates I would worry about her running them over. She is actually a little tall for her age, so she isn't any smaller than her classmates. In fact she is about average height in her class.
The only con that I've experienced has been that my daughter has observed to me that she's younger than your classroom peers. She mentions it, but she doesn't seem too worried about it.