Has any teacher ever let you ruin your education?

Well was there a reason why you wanted to move sets? Often if you personally request to move sets then there will be a good reason, but if a teacher were to make that decision on their own without consulting you, then you would feel less confidence in your previous set.
If you both think you should be in a lower set, then I wouldn't say the teacher 'let you ruin your education'.
If you think it has 'ruined' your education then this is a good enough reason to request moving back to the higher set you were in.

Being in a certain set doesn't 'make you fail', rather the mindset you have now being in a lower set. Nor does the format of the exam, but the reaction and how you treat the actual exam. Both of these things are out of your control and instead of blaming these factors, it would be best to work around them.
You can definitely move back up, but it will probably be performance based. If your teacher notices that you are doing exceptionally well, then you can definitely try ask to move back up again.
But, if you move back up with someone that is bullying you, will this not also affect your performance?
You also should consider reporting this certain person. If they are causing this much trouble to you that you don't feel comfortable being in the same room, you need to tell an adult and have it dealt with.

If I am being bullied in the classroom it may slightly impact academic performance in a way that I don't realise, because I am being bullied in other classes and haven't let that get to me and I wouldn't move down because of them because I am used to verbal abuse and people taking the Mick and laughing at me, but I am not sure how I would cope if this person was to take pictures and videos of me and put it up online. Like I see them recording me because they are sitting next to me. This kind of cyber bullying I haven't dealt with before and sometimes I wish I didn't make friends with her, then I wouldn't have gone down sets and ended up failing. I always fail foundation because you need to obtain more marks to pass, while higher requires less marks to pass. I think generally speaking I am more confident in higher but I can only do higher if I am taught higher.