Hmmm...
well, it sounds to me as though your DS is probably beyond "ideally" gifted and into the range of disadvantage, at least socially.
Does he also have problems behavior-wise in school? Does he feel negatively about not learning anything?
If
he is happy with his placement, I might lean toward leaving well enough alone...
but-- first I'd want to see what he's like with a group of similar-ability peers. Because it could be that he's a totally different person
socially when he has a group of kids that don't just look confused when he uses a word like "befuddled" to describe that look that they're giving him.

I
was a child similar to this... and my mom put a VERY high price on social normalcy and conformity. It didn't matter anyway. I felt like a fish out of water because I
was a fish out of water. I could really have used authentic enrichment that meant something and put me in touch with similar ability peers. Most of the other kids in the GT program were 'bright' or MG. I was more than that, and it showed even there, unfortunately.
My DD is more like your DH-- and there's simply no way that I could have placed her in a regular classroom with peers. It is what it is, but there's no dressing that up and pretending that you can find anything that "fits" well in either dimension. She's a kid out of place no matter where she is-- we just have to figure out where the "least worst" fit is.
To your questions, based on what you've said... (and understanding that your son's personality and individual needs play a role in the relative importance of academic fit and social fit)
1. No, I would worry that it would make him more self-conscious and that 'dumbing down' is pretty much never the right way to handle this one. Perhaps a gentle discussion about how peers sometimes will need to hear words that they can understand... or that he will need to accept that sometimes they simply don't know what the words mean. That's okay, actually-- and it can be a way for him to CHOOSE which he'd like to do; work on communication skills, or accept that he's a bit different.
2. It really, REALLY depends. If he is happy enough to comply in the classroom, I might leave well enough alone, or introduce extracurricular enrichment instead. That way he can keep the social fit and still have a chance to work at more challenging activities. Is there a local chess club for youth? On the other hand, if his social awkwardness stems from not being with true peers, then some adjustment may improve things socially. You're the best judge of that.
3. Does he say why? In what sorts of 'public' situations? Is it possible that this is sensory in nature and not social at all?