What happened? Did they extend your deadline?
FWIW at this point, be careful about the grass-is-greener effect. The other school might seem cuddlier, but if the principal says that all kids are gifted, your son might find himself spending the first couple months of the year adding simple numbers and reading simple passages.
It strikes me as odd that the local school didn't give you any or much time to make a decision. I'd be very wary of a principal espousing the everyone-is-gifted line. Can the DYS family counselors help?
On the other hand, if the other school is for gifted kids, why does your son end up sitting in a corner reading by himself? Why aren't they making accommodations for him? Given the population of NYC, the school should be familiar with HG kids.
What you described makes me wonder if the school *really* is a school for gifted kids, or if NYC uses a wider definition of the term (ie, do they pull from the top 10% of the population instead of the top 2%, and then use a lottery to pick from applicants meeting the cutoff?). In that case, the school might have a lot of bright kids but not as many IQ 130+/MG+ as would be expected.
Have you spoken to the principal and his teacher for next year (at both schools, but especially at the gifted school)? What can they do for your son?
Just my 2c.