His reading took off this year, stamina wise...and now he can read (latest Percy Jackson) no problem. But is he ready to really analyze it, or write a paper on it - no. So what do I do with it? We tried talking about it, took an online mult choice test to test comprehension.
The million-dollar question here is, "Have you read it?"
I began teaching literary comprehension/analysis to DD when she was 5, and I was still reading Harry Potter to her. I'd stop and ask a lot of questions... "Why do you think he's doing this? How is this different from the movie?" In this way, I was leading her into comprehension and analysis, even though she didn't know it. To her, it just seemed we were talking about the book, which she was more than happy to do.
So, my advice is, read the book, and then talk about it with him.
Do I move onto diagramming sentences - that doesn't sound like fun to me, will it to a 5 year old?
Assuming you've already covered the various parts of speech (noun, verb, adjective, article, preposition, etc.), then yes, because it's a necessary skill to understanding the language.
My DD did it when she was six, and she enjoyed it.