C.M.
I would be bothered knowing my young child is playing with a large group of kids that are a lot older. Older kids can be bullies to younger kids, for example, not "letting" her play on a certain piece of playground equipment because they "claimed" it.
We homeschool so I am ALL for letting kids learn to socialize with kids of all ages. HOWEVER, I would not like it in a large group of mixed ages that are probably largely unsupervised--as teachers can't be everywhere at once! I can see why they may have done this, but I wouldn't like it if it were my child!
I agree, get a bunch of parents together who don't like the system and talk with the principal. There is strength in numbers.