I can't quite believe it given that he's only 2.9, and these seats are supposed to cater for up to 4yos. DS1 is quite tall but only 75th centile, although he does have a long back (a family trait). There isn't much information available on when to switch seats, except for by weight or age - he's just about 15kg so he would fit in a stage 2/3 seat, but in age terms he's nowhere near. Any car seat experts out there?
The top of his head is only poking a couple of inches above the seat, so the centre of the back of his head is still supported iyswim.
As long as his ear/eye level is within the seat back it is still ok. Next stage is 15kg plus(not based on age) but the one you have is probably up to 18kg at least and a harness is safer with younger ones.