There is a lot more to the tests for levels than just if they can read it, which is why they are probably reluctant to move him up quickly. They have to test all sorts of things like speed and comprehension, adherence to punctuation, expression and all sorts that I don't know about.
The stage that they are at now also doesn't reveal much about their final reading ability. By about P5 (in Scotland - that would be about age 9-10) those who took their time are often reading in the same groups as those who were whizzing through the early stages of ORT.
I would keep plugging away with him at home working on pointing out the full stops and question marks and things like that.
Try keeping a note of words he struggles with and see if you can spot a pattern. There could be a phoneme he has missed on a day off ill or something little like that that is making a difference to him eg if all the words he struggles with have "ph" making "f" sounds in them or that sort of thing.
Make up a little bag or box or tin of these words, written in simplest handwriting you can do or printed off in Comic Sans or a font like that which has no extra little lines or curls in it.
Go through it every day (you would probably have time before school as you are an early riser) and get him to read every word to you (in a different order each day).
See if you can find any phoneme colouring in pages for family colouring in sessions.
Get him to cut out words from magazines and newspapers to make up posters.
That sort of thing...
The library is your best friend here though. Let him choose but also try to grab a couple that will let him read fluently to build his confidence and one or two that will test him by a tiny amount. I think the guide is that more than two words a page that are a struggle makes it too difficult for them - although I couldn't swear to that.