I can only go off my own experiences. My eldest didn't do any pre-school/nursery until 4 and I was worried how he'd settle. He settled brilliantly. He was nearly 5 when he started so maybe that's why, 4 seems SO young and some of his classmates were only just 4 when they started and I have to admit, they were the children that found it harder.
Fast forward 4 years, all the children in his class are happy and settled. My eldest is thriving, and for him a class of 31 is ideal for him as he has lots of friendship groups.
My youngest has attended pre-school since age 2.5yrs and adores it, he starts school proper next September and again, will be nearly 5 and more than ready... he's ready now to do full days, but I'm not!
I'm not saying MY experience is 'the right one' but for balance I do think it important that people know that large class sizes and young starts aren't always bad.
op it must be awful seeing your child go through this and I feel for you, I also wonder if the night terrors are so bad because your not talking about them gently? I am not a believer in avoidance. My eldest used to have night terrors, and used to sleep walk and wee in cupboards, bins, my bed (!) - I didn't want him to feel judged or exacerbate any problems, but it wasn't until I dealt with them head on (but very very gently and kindly) that we began to resolve certain issues... turned out to be something rather minor from my point of view, but it caused lots of stress for him.
I do think every child is different, and state education needs to be more flexible to accomondate these differences. Not sure how it could be done, and I'm sure it would be a logistical nightmare, but no child should suffer because of school, school should be inspiring and wonderful in the early years.