can he go back to the other class at all? i know that might not work in your situation (with having another to look after!) but maybe the move up in class has shaken his confidence a bit? can he tell you exactly what it is he doesn't like about swimming any more? does he have any friends who go to classes?
if it's really upsetting him & all avenues have been explored then i wouldn't see any problem with having 6 months off & trying again - you don't want it to end up being something he hates so much he never wants to learn.