Maybe if your focus is on keeping the classroom orderly and conforming to standards instead of teaching the individual child, smart but efficient (lazy :)) kids like my son will do the bare minimum. I'm not sure exactly what's going on in class, but evidently he is not at all showing what he can do, probably because he isn't expected to. If he continues at this pace, he will indeed prove that "everybody catches up to the advanced children by third grade." And I think that would be a shameful waste of his ability.
Oh wow - you just described my son and his 2 year school experience so well. I have a kid that would not afterschool and would not show his stuff in regular school with any consistency. I'm so glad you have another option for next year.
For us it led to homeschooling, which has been a night and day difference. My DS does age appropriate work load and output. But can get input at the level he's ready for. He can also pursue his own interests. This morning he set up an experiment related to light and reflection because we've been reading about and discussing physics. Anyway, I hope your child's new school experience will relight his spark! Maybe a little time this summer to pursue his interests will help too.