GMAT Prep 2 disaster

Yes, GMATPrep tests are generally the most reliable indicator of your progress... and I'm not sure what a 130-point drop says. Unless your 680 was inflated somehow (though I'm not sure how this would happen--I don't even think that you can pause the GMATPrep software), then it's probably safe to say that you somehow behaved a little bit strangely on your most recent GMATPrep.

In a way, it isn't hard to explain what happened on your last GMATPrep: for some reason, you got a little bit sloppy, and missed a bunch of questions that you wouldn't normally miss. Careless errors on the GMAT are an absolute killer, because of the adaptive algorithm: the test is giving you a score based on which questions you miss, not necessarily on how many questions you miss. So if you make a few dumb mistakes early in a section, you'll see more easy questions, and you'll be in a pretty deep hole quickly. It's possible to climb out of that hole, but your margin for error is gone at that point.

I'd be willing to wager that if you go back through your test (and you probably already have!), you'll find 3-6 questions on each section that make you want to barf, because you have no idea why you missed them. And a handful of bad errors in the wrong places is all it takes to send your score plummeting, unfortunately.

What I don't know is why you missed those questions. Nerves, maybe? You know that you're approaching your test date, so you tried to be a superhero, and started rushing through the questions without carefully re-checking your work? You can miss all the hard questions you want on the GMAT, but you can't afford to miss the ones that are easier for you... and I'll bet that if you commit yourself to taking just a little bit of extra caution on the questions that are easier for you, your score will float back into the 600s.

I hope this helps. Good luck on your exam!