Sounds a bit arse about face really.
Presumably he has a Statement, so it sounds like you need to revisit that and discuss with the school how they intend to manage his aggression / deal with his frustration / develop his social skills / encourage integration.
All of those things are very basic stuff the school should be doing so maybe a prod from you is now required.
I can see from their POV they are trying to avoid any aggression incidents bt while that may be the safest optuion for other people it is very short-sighted and obviously not bothering to get to the heart of what your shild needs.
To answer your original question surely it is detrimental to him to be firstly held back from his peers, and then secondly allowed to reoin them but only from a distance and on a tight rein. In fact, that is really really awful the more I think about it - they aren't trying to help your son they are just trying to manage any potential problem, and that is not good enough.
My dd's school do "social skills" sessions for all the kids who have issues, for various reasons, not just SN. Some are aggressive, others just too shy to join in and some a bit awkward and unable to join in. Perhaps your school have or could start something similar?