Hi KSB,
I've got a DD7 who just finished 1st, so I've been looking at some of the same questions. Your son's Math RIT is at the 85% for end of 2nd grade and 50% for end of 3rd. His reading is somewhat lower: 63% for end of second and 35% for end of 3rd. Taking the middle of the Lexile range (493) is around a 2.7 grade level using this chart:
http://www.liberty.k12.ga.us/jwalts/Lexile%20and%20AR.pdf

The NWEA anchors "gifted" at the 95% but school districts vary in how they use this information. Some factor this into selection for gifted programs and others don't.

I think it's worth discussing his scores, what they show he's ready to learn next, and the optimum way to make this happen. The 3rd grade subject acceleration in math seems like a good option.

One missing piece is how his scores compare to the mean/standard deviation of the other students at his school. If there are other students in a similar range, a cluster group could work well. If not, the subject acceleration looks better. I've been able to get the mean but not the standard deviation for DD7's school so it's somewhat murky. confused

Another missing piece is the teacher. I'd rather have DD7 with a flexible 2nd grade teacher who differentiates well than a 3rd grade teacher who's locked into the 3rd grade curriculum.

I'm planning to have DD7 start 2nd and ask for subject acceleration for math and reading. If the 2nd grade teacher is a poor match, I'll look at full grade acceleration or homeschooling. My decision is complicated by the fact that there is a full time gifted magnet that begins in 3rd grade, DD7 is very happy socially, and DD5 is even more asynchronous. crazy

Good luck sorting it all out!