It sounds like you're describing MAP testing. Posters on this board have had mixed results in getting appropriate placement based on the tests. If teachers do group kids according to the test results, you'll may find that the instructional level of the top group still isn't sufficient. My son's reading abilities aren't what you're describing, but his math is way out there. It took 3 quarters, but we did finally get him appropriate placement. It was only after that did I discover that DS had been placed with a group of top math performers in his kindergarten class up until that point. We couldn't tell. They were still working on counting and skip counting, something DS had intuited several years previously.
I do want to caution not to make a decision based on one person's positive or negative experience with school. Keep it in mind as one of many possible outcomes, but please don't go into school fearing the worst based on your brother's experience. Do start reading up around here on positive and effective ways to advocate for your son, though, as given what you report, you're going to need it!
