I really don't know what your local options are but when we were looking for a daycare for DD we really wanted a multi-age one. We lucked out and found one that goes from ages 0-12. They don't do any academics there (also something we didn't want) but she's really enjoyed having the older (and even younger kids) around.
She's a kid who needs A LOT of stimulation and is very social so having all those kids around has helped a lot with her sleep problems. It's also just heart warming because she has a little friend there who she goes up to and hugs and says "hello" to first thing in the morning when she goes. It's also in a third language, which has evened out the playing field a bit (most of the kids there have been speaking it from birth whereas she's only heard it passively from me speaking with friends but never talking directly to her).
I'm not someone who is of the belief that kids need preschool at this age so if I wasn't working she'd probably just be at home with me and we'd sign her up for activities that she'd enjoy. Especially since there is such a difference in levels if he's reading at the 2nd grade level already, it'll be hard for him even if you move him up. I think it depends on what they do there. If they're doing more fine motor skills stuff (and he's not particularly ahead on that), it might not be such of an issue but if they are doing stuff like colors and letters he'll probably be bored either way.
Also, do give it some adjustment time. It took DD 2 weeks to be ok with going to daycare and those two weeks were ROUGH. However, she is happy there now, even if there are some tears right after I leave in the morning. Any transition like this will take time.
