I think I'd be willing to accept that interest dictated level if the interest was completely (or almost completely) within a narrow band of ability level already -- like the Junie B Jones + Magic Treehouse example. But in a case like DS's... his interests span a huge range, and while he does like some age appropriate books, there are many more that he doesn't, and some of his favorites are much more challenging. So interest doesn't really do it either...
I tend to think at DS's level, that he's a "fluent" reader... and ability isn't a major limiting factor.
