I'm sorry your family and your son is going through this.
My son turned 8 in may and is in 3rd Grade as well.
Your son has probably had the behavior of the boys in the neighborhood cause issues with how he views himself and his self esteem.Children automatically want to be liked, and now he feels like an outsider, except when he is around the two friends who he knows, he is familiar with them, and he feels safe.
I know we want to protect our children and not see them hurt, but we also know we can't shelter them or protect them from everything.
Maybe he could play outside close to your house, and avoid the other boys yards or houses?You want him to enjoy other activities and not shut down and stay inside.
It might have caused some anxiety for him and now that is causing his sleep issues.
Maybe email or call the school counselor and see if she would meet with him, and he might feel better talking about how he feels?It's worth a try.Or you could get a child therapist through insurance to see him outside of school.
I'm sure your husband wants to help, but also use the boys can work things out method, but I am sure you are worried that you don't want him to deal with it and it turn into where the other boys end up bullying your son either being by being verbal or physical. It's harder to get help when it happens in the neighborhood and not at the school.
Best of luck and thinking of you and your family.
Loving Wife to Chuck, and Proud Mommy to:
I would encourage him to play in the back yard so the other kids don't see him.