Hi shellymos - we're pretty much in the same boat as you. Our DS, who will be 5 in january, is in part-time preschool. We are planning on having him start out in kindy next fall. Academically, he will be miles ahead. He would be ahead in 1st grade too. So, my thoughts are that it might be easier to start in kindy, which unfortunately is all-day here, but since it's a transition year I'm thinking it won't be as hard as just starting in 1st. I think there are lots of extras, like art and music, and he really does need to learn how to write. The school seems to be open to working on him getting something else in place of any learning your letters stuff, and hopefully they will let DS take the school's achievement testing (MAP) this spring so they can see where he is in other areas too. I'm also hoping they'll let him go to some of the other grades for some of the classes.
I don't have the highest of hopes, but for now, since our DS4 doesn't like to sit still for very long, cannot write well, and is just starting to show interest in learning how to spell things, kindy seems a good place to start, especially if the promised differentiation really happens. Also, our DS has always been on the short side for his age.
If all else fails, we have our backup plan of partial to full homeschooling too. It's just so hard to predict when they're not yet in school how things will go. Our plan includes lots of advocating.