This is such a great idea! And it sounds like it works well in practise, too. I’ve often pondered the idea of separating classes by ability rather than age, and this is a really practical method of achieving it.
It was "innovative," in a way I think we're coming to regret, to suggest that all 8-year-olds (for example) must be at the same level across every subject, and none of them should ever be taught alongside a group of mostly 6- or 10-year-olds.
A similar idea is to group children by reading level which makes classes function more smoothly since students finish reading assignments in similar periods of time.