You have a difficult decision to make.  It sounds like the school is working with you, and that is a good thing.  You are correct in saying that research does not support retention.  However, I have seen some students benefit form that extra time to grow and mature, especially in K and fist.

Since the school seems to have your daughter's best interest in mind, can you make the decision at the end of the summer right before school is to start again?  This would give you time to work with her and get a better feeling of what to do.  You can set up a schedule to work not only on the areas of weakness, but also to promote her strengths.  If you have the money, you might want to have her privately testes.  Then when she is tested in the fall, you can compare the reports in order to come up with the best plan for her.

Also, you said that she will be monitored closely next year.  Find out exactly what that means - Does it mean that she will have a strong teacher who can deal with learning disabilities?  Will she be in a small class?  Will she get special services?  How often will they check up on her?  If your daughter is retained, will you have the same teacher or someone new?

I know your daughter doesn't want to leave her friends, but ask her some other questions like:
If you were to repeat first grade, do you think you will have trouble making new friends?
Do you know any of next year's first graders?
Do you like them?
How would you feel if you have to leave your second grade classroom to get extra help?
Do you think the other kids would tease you?
What did you like best about first grade?
What are you looking forward to in second grade?
Do you think you learn differently that the other kids in your class?
How does that make you feel?

I can tell you one thing, your daughter is going to be OK no matter which way you go.  She has you as her mom, and she can count on you.  Follow your gut - I bet it is right most of the time.