First of all wow I thank you for your blessings and kind words, may the blesser be blessed many times.
The situation has the potential to turn around, because now your son wants to be in yeshiva, wants the respect of his RY (looks like the respect of his friends is too shallow and that the charm of the novelty is fading away), however the RY, in my opinion correctly, is not lowering the bar. The boy is very smart and has the potential to achieve what is asked from him. I would let him handle everything – he is an adult, remember? He makes his own decisions. It would be very empowering, and I am quite confident that the RY will be impressed too, so will his schoolmates who will then admire him (and make it less likely he search other people to hang around with). I think you have to step back – at least, as far as he is aware of – from getting involved with the school. Remember? A couple of weeks ago he was saying he wanted nothing to do with it. You could also arrange “randomly” for him to meet the teachers who held him in such high esteem and who no doubt will ask questions about how he’s doing now (he does not want to disappoint them), who perhaps might also be available to learn together, or who may have other ideas we have not thought about.
A school is a school is a school! It has to fit a mold. Of course this is less than ideal, it’d be much better if everyone could learn with a rabbi. But when it is not possible, schools exist and we have to make the most of it, as everyone who went to school is well aware. It’s hard to run a school, and there are so many constraints and so many overwhelming problems. Yes, I agree, it’s a system which hurts people and has to be fixed, but we can’t wait for that. You did not “send” your son there, he was happy to, or else, he’d have definitely voiced his opinion to the contrary, as he’s been doing at other times. True, perhaps this particular yeshiva was not best suited to him. But mistakes happen, it’s a fact of life, and certainly parents and teachers make a lot. The only disaster-proof way of never making mistakes is doing nothing at all. Ask your son how he would organize a school. Of course make sure that any feasible suggestions should reach the school board via third-parties, in addition to encouraging him to suggest directly: if even a small change were to be implemented, but possibly even just a word of consideration, might be something your son never forgets.