Have you considered finding a football program outside of the school?
Our son played 2 years for an organization that was not affiliated with any school. The coaches he had were great and I think my son's head coach would be a little sad/pissed to hear of your situation. He has always said that he wants first and foremost kids that LOVE to play football (which it sound like your kid is) and that he truly believes that football is one sport where there's a place for EVERY kind of body. Big, tall, short, small, fast, heavy, light, slow didn't matter to him.
For example, one of the running backs on my son's team sounds a lot like your son -- a little undersized, but he was HANDS DOWN the toughest kid on the team. He could do more pushups, more squats, more anything than anyone else on the team and HAD to have the highest strength/weight ratio of any kid on the team (or that we played against) by far!
Had my son tried to play for the school program...had he even made it, he'd have been about 1 of 50 kids with 3 coaches. The team he played on the last 2 seasons had about 30 boys and SIX coaches.
Now, granted, I am in a location where that's available and I have no idea if that's the case for you. But, if your son loves to play football, keep looking around to see if there's a program that will work. I don't think that it's true that the "reality" of football is that it's only open to one body size/type -- especially at the youth level. IMO, it would be a shame if your boy really loves football to just give up on it so easily.