Your son certainly is struggling, both academically and in the social/emotional domain. One factor to consider is the increase in work load and academic complexity in fourth grade. It is a jump in terms of the curriculum, and most children see the difference. You mention that special education resources had been considered, and I wonder if this issue might be revisited. Your description of your son's functioning is very typical of children who display learning disability. While he may not require placement in a substantially separate classroom, he might require a reource room for a couple of periods each day. It would also be worthwhile to arrange an evaluation with a pediatric mental health professional to obtain some guidance re: your son's emotional functioning. All in all, your idea about repeating third grade does sound like it bears consideration.
It was a tough decision, many many tears, and sleepless nights (for me!!!), but I'd do it again in a heartbeat. It took about 3 days and she had built a whole new circle of friends. Now all her classmates think she's cool, b/c she knows ALL the "older" kids.
I hope this helps - good luck.