I've seen this work beautifully in classifications up to 4A (old 3A). It takes a team effort from administration of both hs and ms campuses, and thoughtful planning. As the name suggests, I am a superintendent at a large 2A and my band program was in ruin when I was hired a couple of years ago. Our numbers and quality were so low, I knew the fastest way to address it was by adding 8th grade to hs.

I hired a rockstar band director and informed my principals that I expected them to work through all of the master scheduling challenges to make it work. To that point, they even had a plan to do mid-semester schedule changes (to put kids into band) once the word got out that we had a great new director. The numbers grew very quickly, and for those quality over quantity folks (is that really a thing if you're doing your job?) the band went to their first UIL C&SR contest in 5 years last year and got a 1 on stage and SR.

As a primarily 2A band director myself, I inherited a program that moved all of the 8th grade up. After the growth was on the right track, I went to a varsity/non-varsity format. Meaning that I would move only 8th graders that could thrive (usually most of them) and some 7th graders (very limited basis). That is the format that program thrived (several state appearances) under for over 20 years.

So to answer your questions simply: Yes, many (probably most) small schools do this. If done correctly, you will see improvement (you have to teach your tail off). It absolutely can be logistically challenging at times, but the benefits can, and often do, outweight the negatives.