I have no idea about re-entry... but the rest of it sounds like us!
DS is 9, and working at something in the middle-school-to-high-school level all around... (And he does fine with older kids, but I'm not sure how he'd do in a school all day with any age kids, since he's never actually tried it.) But it has worked out really well to count him as a fifth grader (we did do that one skip) even though his work is almost completely much higher than that.
That said, if my DS had been enrolled in 7th/8th and I took him out to homeschool, I think I'd "officially" still list him as 7th or 8th. One of the major benefits of homeschooling at our house is that we can do the harder work but still have quite an open schedule, just because we can be flexible. Also, we can be extremely coordinated. When he has a busy week in one area (book group, or Lego team, or the science fair project) we ease up on something else. Or if we're going to be in the car, we'll do more Pimsleur Spanish and less of the reader and the workbook we use. By the end of May we've usually got it all in, but the schedule can be tweaked in any direction so no single day or week is overwhelming.
Also on the coordinated front, if he's going to have to do some writing for, for instance, Lego Team, I might up the requirements just a bit and count it as a writing assignment (making it a full paper instead of only notes, or something like that). All of this together means that while a laundry list of the things that get done around here would
sound like a ridiculous amount of time and energy, we still seem to have time for playdates and park days and free evenings and weekends. (Well, outside of Lego season anyway... LOL)
SO anyway! I think in your situation, provided it didn't require any Herculean reporting, I would keep him at the grade he is now, but take advantage of anything you can do to open up the schedule a bit. Especially if he's impatient to move on in some areas, and if a toxic school atmosphere is the main problem, you might find that it works out really well that way.
Hope this helps!
