Per HN's Comment Guidelines, I'd assume that Josh meant sorting students by both physical age and subject skill levels. The physical/emotional differences between 2nd graders and HS kids are obvious enough.
OTOH, one of my grandmothers spent her education career in a one room school house, teaching all subjects to grades 1-8. With the right social context, it can work very well.
It was a small town, in the early 1900's. Everybody knew everybody, including the kids - who freely roamed the town when not doing chores or such.
I'd agree that it was very good for the kids' social development...but "foster a sense of community", in the present-day context, sounds like an express ticket to expecting far too much from it.
OTOH, one of my grandmothers spent her education career in a one room school house, teaching all subjects to grades 1-8. With the right social context, it can work very well.