I hate to say it, but for the reading it really, really makes sense to start at level 1. If there's gaps in decoding, it's worth being systematic in addressing them, and AAR just plows you through it, one phoneme at a time. Jump in in the middle, and you just miss the first half of the phonemes.
On a positive note, however, he might be motivated to persist if he gets to show off how fast he can go compared to his younger brother, assuming that is, that the younger can recognize this is reasonable and OK. DD needed every page of level 1, but she didn't need to linger on them. Even doing the program as an exhausted after-schooler, 1-2 months per level has been easily doable for us (usually 1 lesson per day). So your elder could well whip through all four levels in the time it takes his brother to do one.
