It isn't cruel if you look at it this way...will you be giving her the chance to succeed? Yes. Will you be giving her the chance to truly be at the top of her grade level...age wise, with her peers? Yes.
Much better to excel at your own age level in school than to struggle along with older children.
I dealt with the same thing as you, as far as the boredom with pre-k, k stuff...but when they jump into 1st grade, they really take off these days. I started her on K a year early, homeschooling...then, when I went to enroll her in online school this past year, because of her age, they made her repeat K. I ended up being happy about it, because they covered SO MUCH I had never thought to cover (learning countries and cultures, advanced phonics and reading skills, history, all sorts of crazy things I would've never guessed they teach and K...and truthfully, the public schools don't teach those thing to K students where I live.) She did finish the K curriculum in about 4 months, so I knew I had given her a leg up by allowing her to repeat. She's now halfway through the 1st grade curriculum and will pick it up at the beginning of next year, when she's technically in first grade.
So, to the point...yes, I'd have her repeat. She'll do much better with children her own age, really setting into concrete what she should know, and it will give her a chance to be a leader instead of a follower. Also, once they fall behind, it's very hard to catch up. It only gets worse. It's not cruel or horrible, it's the best thing you can do for her.