What reasons do the parents feel warrant her being held back? Is it related to her behavior being less mature than her peers? And if so, in what ways does this affect her (teasing, rejection, anxiety, etc)? Or what else might she do that is not age-appropriate?
Is she receiving any Occupational Therapy for the sensory processing issues? Are all of her senses effected? My son was the opposite of your g-daughter, he was very tactile defensive (resisted touch). Strangely so, he was calmed/desensitized by weighted vests and blankets. There is a science to sensory processing
Does your g-daughter have a 504 Plan or an IEP through her school? I'd be disappointed if she didn't, at least, have a 504 outligning her epilepsy.
By law your school isn't allowed to hold her back unless she fails to meet minimal academic standards. Even then it's tricky and schools can sometimes get in a lot of trouble holding a student back. It's a very case specfic issue.
But do know this... the district can address your g-childs sensory issues with intentions of minimzing out-of-norm behaviors. They can also work on social and emotional needs, finding ways to minimize her constant need for assurance.
If you reply to the few things I asked above, I can elaborate more on how to help your g-child. The answers are in the 504 and IEP and I already know she DEFINETLY needs a 504 for her epilepsy.