I would let her play on the team until next year. Familiarize yourself with travel ball and learn the ropes.Do we just let her have fun, finish out the winter, spring, summer, and do what next year?
There are worse situations...you could be on a team with a coach who berates the kids, or you could be on a team where you kid is so-so compared to the other kids.
Look around and try to rationally determine how "good" your DD is.
Look around in the summer of next year for 12u?
Yep.
Hope the team improves because she likes the girls?
The girls aren't going to get better. The reason your DD is better is because you got out in the backyard and played pitch and catch with her. The other parents didn't.
The parents aren't going to change, so the kids are not going to get better.
Lesson 1: It is not up to the coaches to make your DD a better player. It is up to you and her.
Keep up lessons on the side?
Absolutely.
Or go back to rec?
No, no, no. You and your DD have to get a feel for what "good" really means. You aren't going to find that out playing rec.
Is this a case of grass is always greener?
No. This is a case of a parent not understanding TB. Consider yourself lucky--you are learning the lesson now rather than in 5 years.