OP here: Well we did end up moving my son to the private gifted school.

Our thoughts are that we would try the public again if he is accepted into the full-time gifted program in 3rd grade. The psychologist and the private school had both said that they will help/fight for us to get into the program.

Interestingly, the private school assessed his reading level at high 2nd grade. This has made me relax a bit and I am not as worried about a disability or a discrepency between his achievement versus his ability. Obviously I cannot completely rule out the possibility of a disability without more formal testing.

However, right now I believe that my son was extremely bored by reading the "Dog ran to the store" when he is capable of reading so much more. It makes me very mad that the public school was not identifying him as gifted and not offering him the GT pullouts that might have been able to spark his interest in things a bit. There reason - because of his reading level which was low because he was not retelling the story in a certain way. Agh!!! So upseting.