Yes OHG, what a fabulous summer for you all. My understanding of ZPD would indicate that your relationship with your grandchild gives you the ability to help him find his ZPD and work within that, with your assistance. Even if your assistance is just recognizing the interest and pointing him in the right direction, you have made the learning a social construct (which I think is a good thing). No teacher can do this for 27 students a year, but the mentor/friend/interested person doesn't have to be the classroom teacher. Oh, and you might not end up with something concrete that can be assessed at the end of the month! but we all know when real learning is happening. One thing you wrote about the STAR (is this the same as AR?) is:
"
The STAR reading assessment gives the upper limit of the ZPD, and the lower limit appears to be either the child's grade level, or lower."
My kids were involved in this program also, and while it is much better than having everyone read the same book, it is being sold to schools as more than it ever can be. Every child's ZPD is different, so a computer that calculates vocabulary and sentence structure difficultly can't tell you what it will be for your child. With direction, your grandson was probably reading far above what the test said his ZPD would be. Under other circumstances, other topics, other children, the ZPD may be only slightly above the lower limits of the test.
Both my boys have been avid readers and their reactions to AR programs were interesting. Each of them, independently as they are 4 years apart, decided after a few months that they would only read the minimum required for AR and then chose books not on the list to read for fun. They didn't like their fun reading time being turned into an assignment or a competition. Fortunately, they had teachers who were able to recognize that something that's good for some kids doesn't work for all. And they still read and still like to read, and sometimes they read books that are much too "difficult" by the AR standard, and sometimes they went back and read a bunch of easy books on a rainy afternoon just for fun.
It's great that you fell into this great summer by yourselves! What a gift!