I can't speak for Manhattan tests or curriculum specifically, but over my years of tutoring I've seen the scores on students' Test 2 drop from scores on Test 1 with probably about 80% of all students. It's so common that I usually tell students ahead of time to expect a decline in the score as part of the learning curve, and not to be alarmed by it. Generally speaking, when you get to your second test, you've learned new methods but haven't yet become adept at applying them in a time-efficient manner, so your overall timing suffers and that produces a lot of anxiety, which then impacts confidence, accuracy, etc. I would absolutely NOT consider this a sign that your studying isn't working, but also don't dismiss it as a fluke; it's an indication that you need to put in the time to master the areas that you've been working on. You're at a normal stage in the test prep process, and now your job is to push through it and continue to fine-tune your understanding of the test's contents
And as far as your concentration on one subject area, it's probably a good idea to spread your studying out a little more among the different topics. Focusing on only one area at a time is going to make it harder to see any overall improvement on your practice tests. Even if you feel like only one area needs real attention, keeping the other areas from getting rusty will benefit you in the long run.