allegedly NJ does not allow kids skip the grades.
Not true at all. I teach HS in NJ and have a 14 year old in my honors sophomore class who was skipped in elementary. It really depends on the district. There's nothing specific in NJ's code that allows or disallows it. I'd push your principal if you think it's the right route for your child.
Here's a link to NJ's FAQ, which specifically states that acceleration may be an appropriate accomodation:
http://www.state.nj.us/education/genfo/faq/faq_gandt.htmHere's another link that may be helpful:
http://www.accelerationinstitute.org/Resources/Policy/By_State/Show_Policy.aspx?StateID=35