I'll give you my two cents, since you haven't gotten a response yet. I'm sure everyone's still recovering from Thanksgiving and getting back into the routine of things.
As far as "Beyond..." goes, the language arts is meant to be a gentle introduction to grammar, mechanics, and usage to give your kiddos time to cement the language arts skills of reading, copying, and narrating (before jumping into a more formal grammar study).
I followed the plans as written in "Beyond..." with my second son when he was in 2nd grade, and we are now doing Rod and Staff English 2 as planned in "Bigger..." with him as a third grader. It's going well, and I'm glad we didn't rush into it. Rod and Staff is advanced in scope and sequence, so there's no need to hurry through the levels. All of your first and second graders could do the language arts in "Beyond..." and then move into English 2 together as scheduled in "Bigger...".
As far as the "Emerging Reader Set", if your second graders are finished with phonics and still emerging as readers, the set should be enough for them. If they are actually more independent readers, you may want to take a look at "Drawn into the Heart..." and the Level 2 Book Pack instead. Here's the link for that:
On a sidenote, we did use about half of LLATL Blue with our first son before switching to something else, and I think the Emerging Reader set would pick up well after the Blue level. You may want to continue with some sort of phonics practice as well using something like "Explode the Code" or "MCP Plaid", as I believe LLATL Red finishes the formal phonics instruction that was begun in Blue.
Lastly, as far as spelling, there are two spelling lists provided each week that follow the same spelling rule. One list is more appropriate for first grade and the other for second grade, so the spelling should be fine for your kiddos.
Hope this helps!