Have you asked the teacher for harder books? It's not much to ask her to walk to the 1st grade classroom for a level higher.
Our son gets "easy" books sent home, and he's moved up levels twice since the start of school. He's still not really challenged by the books, but we're doing comprehension work and expressive reading, while focusing on some basic phonics skills that will help with spelling.
We're letting him go up by levels, and since his teacher is happy to move him up, one level at a time is working great.
