The only thing that I would do differently is to let your DS in on what is happening sooner rather than later. I don't think he should be the last to know as I would consider his opinion as important as yours or the school's.
We haven't discussed it with him yet because we want to find out what different options are available to him regarding the differentiation (ie: are there any other options other than moving him to third grade?). My wife and I are meeting with the principal/teachers/top AIG person for our county/etc. this afternoon to find out what all the options are and how the school would implement each of the options.
Once we find out all of the facts then we are going to talk with our son about it and see what he is most comfortable going with.
Again, thanks to everyone for your input.
I'm still nervous but now it's more of an 'excited nervousness'!
TripleB