The teacher who currently teaches the first graders wants to leave all of these children together, and this creating a HUGE problem. I am praying about this and know that I will receive an answer, and would like your suggestions. Bless You for providing this site. But it was more the parents wanting their children to stay together, as opposed to the teachers. I would explain the reasons as to why you believe it is necessary to split, and that to prolong the split is only to prolong the crowding issue.
Many churches have to combine wide age ranges due to many factors, cost, lack of teachers, etc.
But, if your church is able to have more classes, then I believe it is best to do so, because children in 3rd grade are developmentally much further along than 1st graders. Some curriculums, such as Gospellight, combines ages. But it is a two year combination. Blessings to you as you lead. It would make a good Mother's Day gift for kids to bring home.