Okay, so we have to assume that your practice test scores were a bit inflated. Your "true" scoring level on those was probably closer to mid-600s than 700. Which means that, while your score did still drop on the real test, it didn't drop as much as it looked like at first.
Next, that drop was pretty much due to the verbal section. You had to work way too quickly on the last 3-4 questions, so let's assume the worst case scenario (that you got them all wrong). That would account for part of the drop. You didn't sleep well the night before and you had a big stress-inducing incident right before you took the test. Those two things combined would affect you over the course of a 3.5 hour test to the point that you likely would not have been thinking as clearly and as well as you normally did at that point in a practice test. (You may have felt that you forgot all about it and were fresh when you entered the testing room, but those stress hormones don't just magically disappear. They're still running through your body. You might not notice because of the adrenaline rush you get when you start the exam.)
You can still take both GMATPrep and MGMAT CATs with repeats as long as you follow a few guidelines to minimize the chance of artificially inflating your score via question repeats. First, anytime you see a problem that you remember (and this means: I know the answer or I'm pretty sure I remember the answer, not just "hmm, this looks vaguely familiar..."), immediately look at the timer and make yourself sit there for the full length of time for that question type. This way, you don't artificially give yourself more time than you should have. Second, think about whether you got this problem right the last time. If you did, get it right again this time. If you didn't, get it wrong again. If you *completely honestly* think that you would get it right this time around if it were a new question (even though you got it wrong last time) because you've studied that area and improved, then get it right this time.
On the timing issue, try this article:
http://www.beatthegmat.com/mba/2009/12/ ... managementIt also sounds like you need to spend time analyzing your practice questions. These articles can help you learn how to study in the best way:
These three are on overall strategies for that question type (one each for RC, SC, and CR):
http://www.beatthegmat.com/mba/2010/04/ ... mp-passagehttp://www.beatthegmat.com/mba/2010/06/ ... on-problemhttp://www.beatthegmat.com/mba/2010/05/ ... -reasoningThese three specifically demonstrate how to analyze a sample problem (one each for RC, SC, and CR):
http://www.beatthegmat.com/mba/2010/03/ ... c-questionhttp://www.beatthegmat.com/mba/2010/01/ ... r-questionhttp://www.beatthegmat.com/mba/2010/02/ ... e-questionUse these to learn HOW to study. Also, I think this article on how to learn from your errors would be useful for you:
http://www.beatthegmat.com/mba/2010/04/ ... our-errorsThat should keep you busy for a while! :) Get started and check back in to let us know how it goes.