the label won't significantly affect his education. (other than helping it)
his confidence is on the floor because of his difficulties, not because a label has been applied to them.
the label and statement (am slightly in awe that he has been statemented for dyslexia btw, that's amazing) will help him access the support he needs, so that he can improve his confidence.
i think you need to stop viewing it as an end of the world type scenario and just be calm and factual about it. the dx and statement are there to help him. he isn't going to have 'idiot' branded on his forehead.
make an appointment with the ct and senco, and discuss where to go from here. what supports will they be putting in place, how will they work on his confidence as well as his academics etc.
ds will be fine. he already has problems, they have now been given a name, so as long as you treat is as a prefectly normal piece of childhood and learning, he won't freak out.
your job now is to work out what will help him , and ensure the school put it into place. (this is of course their job as well, but somethimes they don't do it, so you have to be on the ball)