School is HARD

Now that I have a 2nd grader, I am beginning to realize how difficult school has become. Honestly! I realized when W started kindergarten that he was supposed to know things that I thought we LEARNED in kindergarten. He struggled because he didn't already know all of his letters, sounds and numbers. I guess since most kids these days attend daycare and preschool, they've already spent time learning their letters and numbers. He did neither and was behind. We worked hard and caught him up and now I believe he's where he's supposed to be for a 2nd grader. He seems to be doing much better than last year, behavior-wise, and is completing all of his work. I don't even have to fight with him to do his homework.
But having real grades has been a shock after 1st grade's S, S+, etc system. I don't know what to do when he comes home with worksheets marked with C-'s, or even D's. If I thought he was goofing off or not trying to do his work, I would be mad but I don't know how to react when he's actually doing his work. He's a smart boy, I think, and doesn't seem to have trouble understanding his math or spelling homework. Here is an example of some of the questions he's expected to answer, on his own.
I celebrate my birthday by having a party. The word celebrate means _________.
A. to go shopping.
B. to spend money on something I love (Wyatt's answer)
C. to make a gift for a friend.
D. to do something fun for a special reason (correct answer)
I can understand why he said B. Over the last years, we haven't had big parties for the kids but they have gotten to go to the store with their father on their birthday and pick out something with their money from A's grandfather.
The other one he got wrong was 'What detail does NOT support the main idea?' I think this a confusing question, especially for a 7 year old. Because he got the 2 wrong, he got a C-. He got a D on another paper for identifying the subject of 2 sentences as Jason called instead of just Jason and The fire instead of The fire truck.
Another question - What does the word flames mean in this sentence? Firefighters help save people from smoke and flames of a fire.
A. hot air
B. the dark clouds that flow from fire
C. hot, bright gases given off by a fire (correct answer)
D. sticks that burn (W's answer)
During a fire, when people are safe, they are _______.
A. not in danger (correct answer)
B. in the way
C. near something that may harm them (W's answer)
D. ready to eat
Because he got those two wrong, he got a D+. He is doing well in most of his subjects but has a C in language, and I don't even know how to help him. Do these questions seem kind of difficult and misleading for a 7 year old? His teacher is wonderful and I realize that she is required to teach the material that is given to her. But it is very frustrating as a parent. And we are not the only ones. Another friend has expressed the same concern, after having a daughter that was ahead last year. Is continuing to push our children like this, going to cause generations of underachievers? Because we require them to understand things that they are simply to young for? And therefore they continue to fail?
Last year we struggled and struggled with Wyatt's reading. He couldn't seem to catch on and therefore catch up, and his teacher continually expressed her concern. I discussed this often with my sister, a reading specialist, and she assured me that he was fine and would catch on. Exactly as she predicted, by the end of the year he had caught up. However, he spent the entire year feeling frustrated and 'dumb' because he couldn't read very well.
Anyway, any suggestions for how to help him? How concerned should a parent be in 2nd grade? Is it ok as long as he gets by and works hard? Even with C's?