Getting the school thing right may well be the best route for your family.
HEers I know tend to talk in these sorts of terms:
Perhaps a child not being in school is NOT an admission of failure, of saying that that child will never catch up. For some children, school would be such a stressful environment at various points in their childhood that they are much more likely to develop in an optimum way out of that environment at various times.
It's not a one-way decision. If later, the sensory issues abate sufficiently, then the child can go back into school.
the HE route might make it more feasible to put a child into environments they can cope with, and put them in overwhelming environments only with easy escape clauses, ear defenders, massive amounts of preparation when necessary (photo books, daily social stories for weeks before the event, whatever it is). The child can take the baby steps they need to in the areas they need to, but fly free in their areas of strength - a child might be reading fluently but still in nappies, say.
Socialising: some areas have big HE communities. There is one in our city, although, at the moment, most of our socialising happens with pre-schoolers whose older siblings have gone to school, or at weekends with children who go to school. We don't really have room in our calendar to squeeze more social life in right now! There are two HE families we socialise with fairly regularly, and there would be many more if I made the slightest effort in that direction.
"i feel i am giving up on dd2 improving enough to live a normal life"
Might be worth asking yourself: when are you hoping this normal life will happen? I mean, she wasn't a normal 2 year old, and you've missed the chance for that. And presumably she isn't a normal whatever-she-is-now year old. Are you hoping she'll magically turn into a normal whatever-she-is-plus-one year old? Or is it more likely that she will catch up in her early twenties? If you are wanting your child to have the skills to pass as a normal whatever-it-is year old, what is the optimum environment in which for her to concentrate on gaining those skills?
I am playing the long game. I'd hope that my child will live a normal life as (say) a 20 year old, having had a really enjoyable childhood with a personalised and optimised education that shifts on a moment-by-moment basis according to their needs, and that helps them grow into an independent adult able to function in society. I think it highly unlikely that they'll merge with the crowd as a pre-teen - that's a really complex and age-specific culture.
For me, sending my child to school would be the failure - failing them - at this point.
Personally, I'm most interested in where my children are on their journey to independence, not where everyone else's are. If everyone else's children are happy to go off to school every morning, then bully for them. If mine aren't happy to do that, I'm not going to make them suffer just so they superficially look like everyone else in terms of daily timetable.
[scuttles away anxiously - I do not usually share this much personal info on MN]