According to testing (WIAT II, Iowa-something) my kids work at grade levels much higher than I would estimate based on the quality of their work. Probably 5-6 years ahead in most categories, but I don't remember exactly. I think my 7 y.o. was in the 9th or 10th grade range for math reasoning, though (not sure how that is possible when he still forgets his division facts!). My 9 y.o. reads anything. They are limited by their writing skills, but can dictate using very sophisticated language.
But there is NO WAY I think that they are really academically equivalent to the average 7th or 8th grader. At least I hope not!
My kids don't get homework and go to a very good, but laid back school. I think it's possible for an 8 y.o. child with a 130 I.Q. to be able to work at about the level of my children (7 and 9) if the eight year-old has been homeschooled or otherwise exposed to very individualized, challenging curriculum.
That said, we did have an experience with a test score that was out of whack (121 vs. 135 WISC and 139 SB with several ceilings hit). So I don't doubt your assessment on the face of it, I just don't think achievement of grade milestones is enough to completely throw out the test scores. In fact, I'd be more inclined to think the test was wrong if you said your reservations were simply based on comparisions to yourself and your other children.
Have you considered slowing down the acquisition of grade levels and focusing on a particular area outside of the virtual school curriculum? Then your son woulnd't have too much work overall, but could focus on an area of interest. In the medium term this might also give you a more accurate measure of his abilities. I think *extremely* high achievement in a single area is more compelling evidence of high ability than working a couple of years ahead overall. And probably more rewarding and more practical.
I also think that by age 8 or 9 kids are really ready to learn a sport - maybe getting really involved in a sport or learning a musical instrument or learning a language (REALLY learning a language) could occupy some of him time productively. I guess what I'm saying is that it's possible to allow him to be challenged in alternative ways.
This is really an interesting post because I find myself wondering why you are so eager for your son to progress gradewise, but OTOH, if he had a documented I.Q. score of 160 I would probably assume that he "needed" the additional challenge. SO perhaps I am coming at this from the wrong angle. I hope you get some other replies disagreeing with me.