This is great to hear, Kirsten - I think your dc and you would enjoy doing BHFHG together so much! Praying is the best way to make a decisions, so it's wonderful to hear you are doing that, as the Lord always has the best advice. We are just a few days into BHFHG with my middle ds (half-speed), and he's loving it already.
I think the Emerging Reader's Set sounds like a good fit for your youngest. As far as your questions about DITHOR, since you mentioned he has not done much writing, I think I would start him in DITHOR 2/3 for the Teacher's Guide's plans and for the Student Book. Then, you could either use Level 3 Book Pack which has a reading level of 3.5-5.1, or Level 4/5 Book Pack Boy Interest which has a reading level of 4.0-5.7. Here are the links for those:
http://www.heartofdakota.com/drawn-into-optional.php
http://www.heartofdakota.com/drawn-into-optional4-5.php
Or, you can choose any other books you want to as long as they fit in the genres.
If your torn between the two packs, I guess I'd choose the easier of them (Level 3 Book Pack), since it is his first time doing DITHOR. However, if he is a strong reader, you could have him do the Level 4/5 Boy Interest pack. Either one would be fine.
Then, after he finished DITHOR 2/3 Student and plans, the following year, you could bump him up to Level 4/5 in the DITHOR plans and Student Book 4/5. I just think this plan would give him a strong start in DITHOR, and he'd have a good foundation of the Story Elements, etc. before being asked to do some written assignments more on his own in 4/5. In 2/3, you'd be able to get him started on his written work and walk away for him to finish it. But with 4/5, since he hasn't done 2/3 before, you'd probably be doing most of the Student Book with him. I hope that makes sense.
As far as how long DITHOR takes, it is scheduled daily in BHFHG, so you'd go through all 9 genres in a year. The following year, in PHFHG, it is scheduled 3 days a week, so you'd get through 4-5 of the genres that year, and then the next year in CTC, it's also scheduled 3 days a week, so you'd just do the other half of the genres you didn't do during PHFHG. Of course this is all extremely flexible, if you'd rather do daily DITHOR in PHFHG or CTC, then you'd get through all 9 genres each year, for example. Ever since we started PHFHG, we have a goal to get through all 9 genres every 2 years. This pace has worked well for us. However, if one my dc showed a need for more reading instruction, I'd up it to daily then.
As far as grammar, yes it is separate from DITHOR. Our goal is to get through R & S English 6 by then end of Grade 8. R & S Level 2 is scheduled in BHFHG daily. So, you'd get through all of 2 that year. In PHFHG, all of R & S 3 is scheduled daily, so you'd get through all of 3 that year. In CTC, either 4 or 5 are scheduled half-speed. Half-speed options have you do a lesson only 2 days a week, and full-speed are 4-5 days a week. If you ever wanted to do a different pacing than those provided in the HOD guides, it is not difficult to do (though I do just what's in the guide as I find that super easy to do

).
All of these are just ideas - you will know what fine tuning decisions seem to fit your dc best. Keep asking questions until you have it ironed out. This time spent on placement is well worth it, and once you start HOD it is simply a breeze.
In Christ,
Julie