I know that this can happen (take any one-dimensional subspace, for instance), but I had the following thought while reading Kadison and Ringrose (Fundamentals of the Theory of Operator Algebras, Vol I):
If $V_0$ is a subspace of $V$, then $V^*$ can be thought as a subspace of $V_0^*$. Now, for each element $\rho \in V^{**}$, Theorem 1.6.1. of this book,
Theorem 1.6.1.: If $X_0$ is a subspace of a normed space $X$ and $\rho_0$ is a bounded linear functional on $X_0$, there is a bounded linear functional $\rho$ on $X$ such that $\Vert \rho \Vert = \Vert \rho_0 \Vert$ and $\rho(x) = \rho_0(x)$ when $x \in X_0$.
implies that we can extend $\rho$ to a functional over $V_0^*$, that is, $\rho \in V_0^{**}$.
Thus, if $V_0$ is reflexive, then there exists $x_0 \in V_0$ such that $\rho(\eta) = \eta(x_0)$, for all $\eta \in V_0^*$. Consequently, $x_0 \in V$ and $\rho(\eta) = \eta(x_0)$, for all $\eta \in V^*$, since $V^* \subset V_0^*$.
Where is the flaw in this argument?
Let's examine your proof closely, in light of your comment.
We start with a $\rho \in V^{**}$ (good), i.e. a linear functional on $V^*$. You then want to extend $\rho$ to a linear functional on $V_0^*$. As per Qiaochu Yuan's comment that you were replying to, "extend" is really the wrong verb here. But, even so, you seem to be searching for a surjective map, and there doesn't seem to be a canonical surjection from $V^{**}$ to $V_0^{**}$. This would have to be clarified in the proof.
Even if you do manage to construct one such surjection, remember that it's not enough to simply construct some kind of surjective map from $V^{**}$ to $V$, it must be the canonical map! For example, James' Space is a non-reflexive space that is isometrically isomorphic to its second dual. So, while it's possible to stumble through and find a suitable surjection (indeed, surjective linear isometry), it is the wrong surjection! So, you should be careful not just about finding linear maps, but making sure they are the right linear maps.