Canterbury Snails I share many of the same thought processes and concerns.
It does seem pointless to do the tests, if you are going to be marked down on the result if you have not shown you have the ability/current attainment at that level.
I believe DS would be working at perhaps a couple of sub levels higher if he sat with a higher ability group. I think he has more potential than he shows. Our ability groups are largely static and are not differentiated for literacy or maths. The teacher believes he is better placed as a high achiever amongst a lower achieving group. I don't agree and think that a child should at least have a chance to show they were capable of more or being stretched without this impacting on self esteem etc. As a mother I think gentle pushing and challenge is absolutely fine for DS but have listened to the teacher so far.
We have a situation where the same group of hard working girls have sat together in the top level group all year. They are all on the same level book band and all, I think, are working at the same level - I know that 3 of them are for certain. They all have extension work and are pulling away from the others although the next table down are all working to a high level also.
I go in to help and I look across at the visible industriousness and keenness to learn at these 'top' tables and then cast my eye to the my sons table on the other side of the classroom. The children were laughing and pretending to be various animals and one boy blew a raspberry at my son and knocked his own chair over for fun and high jinks. Crayons are being thrown and so on. It isn't terribly disruptive and done in good fun but the tangible difference between the top half and bottom half of the class is very obvious. My son copies the work ethic and the behaviour of the children in the group, so I can't but help wish he was in with the hardworking groups. He would begin to work harder I think.
Outside of school we do various other activities, in each case my son surprises us with what he is he is capable of. He isn't a genius but children, I believe, sometimes deliver what we expect of them.
In our seemingly fairly static ability groupings in the classroom it is as if sometimes the ability group 'levels' somehow are the main driver, the children fit them rather than the other way around. It's all very neat and tidy in terms of NC levels from top to bottom.
The teacher has told me that there are a few that she wanted to move down from the top group and has told the children in the past to pull their socks up but he fears a backlash and onslaught from the parents. I don't blame them. I wouldn't want my child moved out of the top group either!