Welcome!
Schools, of course, each have their own policies, with a certain amount of latitude depending on local conditions. It is within the range, though, for a school to target placement to the upper end of the receiving grade for a grade accelerated student. Partly, this is to minimize artifactual grade penalties. (E.g., if the student would otherwise have had all As, qualifying them for some kind of award, or access to special programming, but now has Bs and Cs because they've been grade skipped, and no longer meet the transcript-based access criteria.) Grades aside, academic instructional level is not the only skill that becomes more challenging with a grade acceleration. Equally--or even more--important are executive function and study skills. Or, in the case of a five-year-old, presumably in his first formal school experience, "how to do school" skills. Challenging a student in both domains at once may or may not be appropriate to this specific child.
The flip side of your question is, perhaps his "normal developmental issues" are a good reason for keeping him in a split placement for the first half of next year, and then contemplating full grade acceleration from a 1/2 placement into a 3rd grade placement in fall of 2020. It may be that a discussion about different entry points for acceleration may be in order; this is not the only moment when changes will be possible in his educational path.
For context: we also entered a child directly into first grade at age 5 (although not quite as young as yours). The school was also hesitant, but did not offer a split placement. We managed to talk them into first rather than K, mainly because our child demonstrated reading skills at a late first grade level prior to first grade entry. We did have some issues during the year with immaturity (behavior and attention), but were able to work through them, with substantial assistance from an extremely experienced and patient teacher, and a very small class size. Plus, I've been on the school side of acceleration discussions, and was able to provide consultative support.
For your reference, this document from the DG database:
https://www.davidsongifted.org/Search-Database/entry/A10123Particularly relevant, specifically about kindergarten-age students in the summer prior to accelerating into first grade: "For early advancement to first grade, Proctor, Feldhusen, and Black (1988) recommend what seem to us reasonable minimums: reading comprehension and arithmetic reasoning at the second-semester level of first grade in the local school district. Such achievement assures that the child will not be among those who need a little extra time with these skills, as do many children with age-appropriate or even advanced cognitive development."
The analogous level for your child would be current performance at the second grade, first semester level in reading. I.e., about half a year ahead of his first grade classmates. From that standpoint, 75th %ile is not an unreasonable standard.
