JenSMP,
Why is your local public school not an option? I feel it's hard to really tell about a school unless you've been in it a while. And then, it can be just a bad teacher that year. The goal is to find out what the school's policy is and if most of the teachers reflect that policy. Our district has a no acceleration policy and for the most part, it is adhered to by the teacher. At most there is one grade level up by grouping in the classroom for reading. All the other instruction was everyone on the same page doing the same thing.
After having a disasterous K year and still seeing the ramifications of it years later, my VERY biased opinion is if this is a toxic environment for DC and you can homeschool the rest of the year, go for it. And in the meantime, get in to magnet school, see if you can find some parents to ask very tactful questions to. See if you can observe the 1st grade class. Find out what the policy is on subject acceleration etc.
There are several ways to test to see what level he is at. I'm not sure which is better than the others. There are several online assessments. One is at mindsprinting.com which does math and reading. There is one for a fee, which I recently purchased for $15 through homeschoolbuyers co-op. The reading assessment is supposed to be extensive and give you scores for 8 aspects of reading (decoding, comprehension, spelling, etc). You can purchase achievement tests from online services. I used Brewer's testing service to purchase the Iowa Test of Basic Skills. You could give this out of level, ie give him the 1st grade or 2nd grade test and see how he scores. That covers grammar, reading, science, math, social studies etc. You administer the test and send it in for scoring. You can have a testing service and/or psychologist administer an achievement test such as the WIAT or WJIII. Those only have a few questions per grade level so they aren't useful for placement purposes but would give you an overall feel for where DC is. You could then follow up w/ out of level grade level testing.
I'd be happy to answer any HSing questions you may have. This is my 2nd year homeschooling my 4th grader and my 1st year HSing my 1st grader. I also have a 2.5yr old.
Dazey