A history of recurrent ear infections in early childhood can certainly be associated with relative weaknesses in phonemic awareness, because of vulnerabilities in speech sound discrimination, which then cause them to have a much poorer sound-symbol correspondence (the sounds they perceive aren't the same ones NT learners perceive, so it's hard to associate those perceptions with our writing system). And yes, in high-functioning learners, often the only place you really notice it is in spelling.
Whether your schools would qualify either of your older kids for special education, you still have options for focused remediation. Although you probably would have difficulty working purely on reading remediation with someone who reads as well as your DS1 does, it may be worthwhile to try an Orton-Gillingham-based spelling intervention on your DS1 and DD. (I used All About Spelling
https://www.allaboutlearningpress.com/all-about-spelling, starting right from Level 1, Lesson 1, fast-tracking through the known skills, and slowing down for the gaps--and there were gaps, sometimes in quite unexpected places. There are other home curricula, such as Barton and Logic of English, but All About Spelling separates spelling from reading, which makes it feel a little less babyish for some learners.) I found that it had ancillary benefits for reading as well, since it's the same intervention, just from the spelling/encoding angle, rather than the reading/decoding angle.
If phonetic decoding (sounding out unknown words) is actually intact, you could also try a fluency intervention. I usually recommend HELPS
http://www.helpsprogram.org/materials.php, which is a free download/low-cost printed curriculum. It's evidence-based and targeted at fluency. Both AAS and HELPS are designed to be implemented in short, frequent sessions (20 minutes apiece, 3-5 sessions a week). Both are scripted, and can be used effectively by a reasonably responsible college student or a parent.
And on homeschooling your DS3, if you loved it, and he was less distressed than when in school, then on balance, it may be that the missing of kids is not as critical as the need for a seven-year-old to be on pain medication just to make it into school. He can still participate in extracurriculars with other kids. Many public schools will even allow home schoolers to bring kids in for afterschool activities and sports, or possibly for specials (art, music, gym).
