What a frustrating experience this must be for you! In the past, parents knew that children this age often say hurtful things to their peers, and very few acted upon their threats. I would hope this is the situation in your son's school. However, no threat against one's life should be taken lightly, and if you feel there is a real danger, you have every right to remove your child from that school and continue his education at home.

Your first step is to find out what the homeschooling laws are in your state. Homeschooling is legal in all states, but requirements vary quite a bit. I would also contact a homeschooling support group near you, and speak with a homeschooling family. Often, experienced homeschooling families can guide you and help you interpret the laws. For lists of homeschooling laws by state and a support group near you try:
www.homefires.com
www.midnightbeach.com/hs/listlist.f.html
www.homeschoolnewslink.com

Once you know the legal requirements, simply notify the school that your son will not be returning, and you will be homeschooling him. This is your legal right as a parent.

At this point, my concern would not be keeping him at his grade level, but rather providing a safe, loving environment so he can regain his confidence. From your description, he is a very bright boy, and will easily catch up to his peers with a minimum amount of effort when the time is right. Please visit our homeschooling channel and read the homeschooling articles. Also, The Beginners Guide To Homeschooling by Patrick Farenga will help you get started with a minimum amount of effort. Good luck!