If you stillhave the Chinese trigger in there, you have probably one of the best stock triggers. The RSA is better, but all the Chinese triggers I've squeezed have been darn good.
The loss of the front sight may have something to do with it. Chinese barrels aren't the greatest for accuracy, but I'd think you could get better out of it.
I think the red dot sight is the biggest contributor to your big groups. Think of it this way, if you have a 5-8MOA dot, then you're not going to really have a good chance at getting better than a 5-8" group at 100. Red dots are for close-in, fast shooting. They're great for that, but when your range opens up, the relative size of the dot gets big too. If your red dot covers an 8" circle (and has fuzzy edges, parralax, etc) then it would follow that you're going to have a hard time keeping groups less than that.
I used the same BSA red dot on my MAK-90 .223. It shot crap groups at 100yds, though it was WAY faster than any other rifle at nailing stuff at close range. It would be an excellent CQB set-up. I ditched the red dot and went with the sights (I only had the cheap ass top cover mount it came with, which is worthless) and my groups are now about 4" at 100yds, with Wolf .223. Not the same caliber, so comparison can't be made well, but before that I was getting 6-8" groups at 100yds with the red dot.
The AK has always had accuracy "problems" because of the sighting system. The sight radius is only about twice as long as a .45 Auto, and they aren't exactly target sights either. Combine that with the ammo quality (which all seems kinda dodgey from a match point of view) and all the things hanging from the barrel (front sight, gas tube, handguards, etc) and you aren't going to beat out a Rem 700PSS any time soon.
Of course it wasn't designed for beating a 700PSS, but I think if you tried the iron sights and took your time, you'd have gotten better results. A low power optical system (i.e. scope) will help, but you need a good mount. Since you've already removed your front sight, and have a mount in place, I'd try a scope and see what happens. It's the logical next step.
Ross