You need to do more than shake the #2 bottle. it is notorious for the solids to precipitate out of solution, sink to the bottom and coagulate there. You need to bang the bottl on a hr surface, shake it like mad for 30 seconds, bang it again a couple of time and shape it violently some more.
When you remove water from the tank to test, do not take it from the surface. Try to take further down from the surface. You can do this by inverting the container ot test tube and submerging it. The turn it ove and it fill with lower level sample water. You can then pout back (or out) the excess.
Diluted testing will work. But you do not need 1/2 gal of water to do diluted testing. 1/2 cup amounts work fine. Start with a larger clean container and add 1/2 cup of tank and 1/2 cup of tap and test that using the normal test tube filled to the 5 ml line. If the reading is under 160 ppm then multiply it by 2 to get the actual ppm.
If it is still reading 160, add another 1/2 cup of tap water to the mix and retest (rinse the tube between tests). If the result of this 2nd test isunder 160 ppm, multiply it by 3 to get you actual ppm.
If it is still not under 160 ppm after the second test, then add one more 1/2 cup of tap water to the mix and restest using the runsed out tube. If this result is under 160 ppm, multiply the result by 4 to get the actual ppm.
Until you do get a result under 160ppm continue to add 1/2 cups of tap increasing the multiplying number by with each addition until you do get a reading under 160.
A part of the problem here is organic matter doesn't break down instantly, it does so over time releasing and ongoing amount of ammonia The bacteria for ammonia and nitrite will reproduce when there is more of these things than they need to thrive.
I will be surprised if you need to do more than one or two diluted tests. I think the issue is not how high the nitrate is as much as how long it will take for the excess organics to break down and end up as nitrate.
if you know somebody with healthy tanks and like plants, if you can get/buy some of their excess or cuttings of stem plants, these will help as they should be able to use nitrate to some extent. Also, when they use ammonia (as ammonium), they do not make nitrate from it.
edited for typos