An 1800 SAT is not bad at all; it's far above average. And 700s on SAT IIs are good even by most CC posters' standards!
Anyways, why are you thinking about dropping the course? If it's just to focus more energy on your SAT scores, I don't think you should do it -- taking a more advanced English class will, in my opinion, help you out in CR and Writing. (I know that practicing for the English Language AP helped me on the Literature SAT II, and Lit is basically a more advanced version of CR. Also, the more you practice reading and writing, the better you'll be!) If it's for other reasons, like an already-difficult schedule, and you don't think you can handle it, you should be fine dropping it. It depends on what you think you can take on.
I hear that the AP Lit test is pretty easy, and my school doesn't even do much as far as test preparation. Judging by your spelling and grammar in this thread, you shouldn't have much of a problem with it. (Really, Lang and Lit come down to whether or not you can write... and understand passages, which IMO is closely linked with the former.)
As for credit, it depends on the school. Some take credit for the Lang exam, some for Lit, some for both, some for neither... but it's likely that you would be able to get out of a freshman-level English course with a good score on the Lit exam.