Too me the better solution is to have the smaller kids, if necessary, play on a lower level team instead of playing down. If people are so concerned about kids playing with their classmates why would we have them play down?
Where do we draw a line on size? You could just be a kid/teen of small stature vs a kid/teen that is a late developer. I think the concept of bio-banding is more of a temporary thing and more for late developers. If a kid is just going to be small post puberty, do they get to play down permanently?
Of all the team sports played at the highest levels, soccer has the least limitations in terms of size. However, small size is a much bigger issue in US youth soccer because of selection bias. Larger size is a subjective measure in terms of actual soccer ability, however, it is more of an objective measure in terms of winning games. Therein lies the problem.