How should I group my students?

You can organize students any way you like, but you don't generally need to group students by any of the data you add on a student's profile—i.e. grade level, background flags, etc.—since you will be able to sort students by these fields at any time. You may want to consider organizing students by class or by goal or by content teacher. This allows you to view results, chart graphs, schedule forms, etc. specifically for that group of students.