I did it.
I gave our local primary (generally seen as atrocious) a chance. It turned out to be a lovely school, pastorally. It had huge grounds despite being in London, in comparision to miserable concrete playgrounds at most of nearish privates. It also had a far more relaxed vibe and less stressy, BlackBerry-gazing/yummy-mummy parents than at the private schools I toured, where they were asking questions like "Why don't you teach Latin from Y3?" etc.
It turned out to be a lovely school. However, academic standards weren't very high (they're improving now), plus at the end of yr 2, we learned a lot of dc1's close friends would be moving abroad.
The only private school near us that I liked and seemed relatively down to earth started at y3, so it seemed an obvious time to move dc1. There's no doubt she's receiving a better academic education at the private school, but she was very happy at her old school and had her friends stayed, I would have kept her there, and tried to fill in the gaps myself.
Dc2 is at the state school and we haven't yet decided whether to move him or not as he is as much more robust and academic character, plus the academic standards are higher now.
I think that if you like the look of your local state, it's worth giving it a whirl and see how it works out. You will probably be pleasantly surprised. State schools in London are improving all the time, many are excellent.
Personally, I didn't give a monkeys how others in the community viewed my decision, it was personal, it was correct for my child, it was not a judgement on them and their decisions. The school were fine about it. But I do know other parents who've been rollocked by the head for moving their child at 7/8, so it might be worth enquiring discreetly how this will be viewed, just so you can prepare yourself.