I agree that the best course of action is to appeal to get this sorted out.
The PAN is obviously 10 but I find the idea of separate classes of 11 and 18 some what unbelievable. It is simply not financially viable in the current funding regime - the average cost of a teacher is usually about 23 to 25 pupils in the class. Tiggytape makes a good point over whether the head teacher is running two classes but actually there is only one qualified teacher across both the classes. I would hope that the head would not be doing that, but the set up and the intransigence of the head teacher could be explained by this answer. He simply does not want to admit he is running with one less qualified teacher than he should have with two separate classes.
Assuming that this is not the answer (you will only establish this at appeal) and somehow the school is affording two qualified two teachers in two separate classes then I would make the following comments.The reception year has 11 in it and so the school can say that they are formally full as they have exceeded the PAN. However unless the reception class is combined with nursery kids, the stand-alone class of 11 means that it is not an infant class size case (as there are less than 30 in the class and the year 1/2 class also has less than 30, so there can be no possible future prejudice).
Given that the reception class only has 11 in it, it is difficult to see how they could possibly argue at appeal that it is full or present a good case not to admit one further pupil unless the classroom was incredibly small.
When it comes to the year 2 situation, the school and LA are not allowed to keep open a place for an extended period of time - the most they could push it to is half a term in my opinion. The head is completely wrong to say it is in-definite. The current 2012 code on admissions is very wishy-washy on the way that places are allocated to in-year applications but in the absence of other information the normal process is to fall back to previous practice. The previous 2010 code on admissions is more explicit and in paragraph 3.23 says "applications made outside the normal admission round must be considered without delay and a formal decision either to offer or refuse a place must be made." Must has the force of law and cannot just be ignored, so they have to do something if there is an available place and somebody is asking for the place.
In theoretical terms the head teacher is correct that he can refuse to admit over the PAN of 10 but he seems to be fixated on not being able to go above that number. That used to be the situation but it changed with the current admission code and schools can go above the PAN where it is appropriate. The head teacher could admit these two twins now if he wished, so that there were 11 in the year group and 20 in the class.
Admitting twins as excepted pupils in an infant class size case is only allowed at reception year. This stand-alone year 1/ 2 class only has 18 in it, so it is not infant size regs and I would put a large bet that if it went to appeal any admission appeal panel would admit a second twin to a class with only 18 in it. I would also have to say that it is difficult to see how the school could mount a strong case to not admit the second twin and also admit your child as the class would still only have 21 in it