Good job recognizing that the school wants him in the lower class because they want their test scores high. It is hard, as a parent, to recognize when a school does not have your child's interests in mind, but it does happen. What you see happening is actually very common in honors courses.
Why would you want him to dumb himself down? As HE doesn't want to go to a "top" college, and he is passing the honors course with-o any effort, let him stay there. This class is giving him something of a challenge. He isn't skipping it so it cannot be tooooo boring. As he plans to take another math class, if you put him in the lower level he will do even worse.
Bored difficult children cause problems. Sometimes major ones. If you move him down a level he still won't study, he will learn even less, and he will be resentful. It is a recipe guaranteed to produce more conflict and problems. He is not being hurt by staying in the class. School may get frustrated but I would want the challenge to still be there for my difficult child so that on some level he will still be learning. I think having to go into a lower level class would make him feel worse about himself, he would have to make new friends in the class, and since the social stuff is often very hard for difficult children I would worry that he would just decide not to do it.
Just my opinion.
