It's not really strange, and it's not necessarily a bad thing. It would be stranger if moving to a harder reed was totally easy, surely?? Like I say, I'm no oboist. But oboists have to eventually learn to use harder reeds to improve their tone, as I understand things, and while the transition might be hard, that doesn't mean she has regressed or that things won't eventually improve. I would be surprised if the transition to a harder reed would in the short term result in better/easier tone, possibly quite the reverse

, but long term benefits are more important

By all means speak to the teacher if possible, but don't assume that because progress has slowed or improvement of tone has slowed that something is necessarily terribly wrong.
Maybe some of the oboists around here can give more help, but if her teacher is making his own reeds then presumably he's an oboe specialist, so, with respect, knows rather more about teaching and playing the oboe than you do

and quite possibly has his reasons for progressing your daughter to a harder reed.
It may be that he intended to scrape it more, or that he was just seeing how she coped over the summer,
(Different situation, but for similar reasons I threw a G5 piece at my just-passed-grade-3 flautist... I wanted to stretch her, to see how she would cope... her first reaction after the week back was "it is hard!" - but that was largely the point, and she coped pretty well with it and had a huge sense of satisfaction when she realised she had made some inroads into a piece that was basically "too hard"
) or any number of reasons. He may be willing to move her to a different reed if she is not coping - it's definitely worth asking

But "Liz the reed is too hard,
this I know for a fact" - no you don't... you're not an oboist, nor an oboe teacher, unless I missed something

I don't think one should ever be afraid to ask questions of a teacher, & indeed I would encourage you to do so - even if his intention has been to stretch her by giving her this reed, if it is discouraging her so early in the holidays, he may decide to rethink. And indeed, he may have made a mistake or given her a duff reed. (Duff reed sounds unlikely to me, to be honest, if he has made it himself presumably he will have tested it along the way. More likely if it was store bought, even with clarinet reeds you get the odd duff one and they are much simpler than oboe reeds

but yeah, it's possible, he may have given her the wrong one or something) But on the other hand it would be sensible to talk with the teacher and ask for some reasons/explain the problems, before assuming that he has made a mistake giving this reed to your daughter
Plateau-wise - I don't think given that your daughter has got to about G5 standard in a couple of years - am I right in thinking she started at 10 and is now about 12?? - that she has had much chance to "plateau"

Grade 5-6 level isn't an unusual time for students to plateau, I did on the violin for several
years, and many of my friends on various instruments got to that level and then gave up or had progress slow down considerably for months or years.
Especially if she has got to the stage when harder reeds are necessary and more is expected in her exams, especially as she has been playing a relatively short time and is still quite young, it doesn't seem unlikely that on an instrument which requires such stamina things may level out for a while. She's done amazingly well to get so far in that short time, however it is possible that she simply requires some "catch up time" as her body adjusts to the greater demands of a harder reed - the oboe is a strenuous instrument and she's still young

Like I say - I make no claim to have a clue when it comes to the oboe, and would definitely encourage you to tell the teacher she is struggling and ask if it is possible to have a softer reed/adjust the one she has. Just bear in mind that the teacher (one hopes) is an experienced teacher who has done this before, so it may well be that he has reasons which would not be immediately obvious to a novice oboist and her mum. If I were in your shoes I would also want to know those reasons and would be seeking not to discourage my daughter

but the reasons could well be good ones.