Health
I understand your feelings, as I know several people this happened to. One of those is a neighbor who wanted his child to go to one particular yeshiva because of it’s amazing reputation. When she wasn’t accepted, the parents became very defensive and angry with the school. It never dawned on them that after depriving her of a yeshiva education for years, she lacked even the most basic skills to enter the school at the appropriate grade level. They would not consider sending her to another yeshiva that caters to kids at her educational level. They were not interested first and foremost in A yeshiva. They were interested in THAT yeshiva. Presumably, they did not know better.
I also know of two people who were in yeshiva and at different ages were “kicked out” because of lack of academic ability. Both these people wound up in public school. One stayed frum, married frum, and raised a wonderful family, the other literally went off the derech and married out, blaming the school for HIS choices in life. B’derech sheadam rotzeh leilech, boh molochin osoh. The choices that matter are the choices you make today. They both had reasons to be angry. Maybe the schools needed to help them find more appropriate placements (my opinion). Maybe they wouldn’t have accepted it.
A school doesn’t have to accept every child just because they are a yeshiva. They should be mentchlech and help link them to places that are a better fit.
I think what the school did was truly commendable. Sending out letters to all the families allows parents to explore with their kids if they were ever victimized and to seek help and support.