If you are going to have ability based ensembles, you have to honor that top to bottom. Kids don't get put on the varsity athletic squad due to a "scheduling convenience". Band shouldn't be any different. Hard work is rewarded with better placement. Period.
To place that kid in a top ensemble to appease an enabling parent would be a slight to all the other kids in the program who do work hard to be where they are. Every kid in that program knows where they stand with regards to ability.
You won't die on this hill. You will prove a point to every kid in the program that effort and work are reward with advancement. If that kid quits and wants to badmouth you? Fine. You will, no doubt, have the support of the rest of your kids and parents. Most often, kids/parents like the one you are describing have a reputation that reaches far and wide.