Oh dmo - what an awful time you are having with your DS.
However, you know 10yo is still very young, they don't have the judgement to make the right choices all of the time at that age. This was an unacceptable lapse of judgement on his part, but we all have them from time to time, and 10yo's have many more of them!
Part of the issue with the porn is that, having never been around it before, he will not know that it is socially unacceptable, particularly if the boy he first saw it with uses it fairly openly in his household . As such as a one-off lapse in judgement then it is almost understandable.
The knife pulling incident actually troubles me, way more than the porn does. Most 10yos know that knives and phusical threats as serious as this are a no, no. He is now at the age of criminal responsibility and had your sister's bf wanted to, could have had him charged, and arrested for a criminal act. He has to learn better skills to cope with his anger - much better! I do hope that you can get some help for him from your GP - an anger management course, counselling etc.
It seems to me that your son is at a point in his life where he has the choice to follow a good path or a bad path, you need to get very active (as you have already been) to make sure that as far as it iw within your power he goes down the good path. This may mean stopping all contact with the other boy - I think you are quite right to take this course of action.
I would also talk to his Head and see what their take on all this is. Can they separate the boys at school - different classes perhaps?
I think what you need to do, is get your son back home and talk, talk and talk to him. He must know how serious all this is, how concerned you are, but that you love him unconditionally, and will move mountains to get him the help he needs to see him through. I think mentioning that the knife act was a criminal act and it is only because of his sisters b/f not calling hte police that he is not sitting in a prison cell might just give him an idea of how close to the wind he is sailing! But he must know that you love him - without that I think there is no hope for him!
Good luck