I'm shy to an extent as well... however as I get older, I'm coming out of my shell more. (I just got tired of caring what others think of me)
We moved to a small town close to 2 years ago and I know how hard it can be to meet other people, esp w/ kids your child's age. But here's what we did... I began talking to the K teacher, other parents and we joined a really great church. My kids have a selection of friends now. And one of my older daughter's best friends decided not to be friends with her anymore. It goes back and forth on any given day, but I just started getting her together w/ a different little girl. I also made the point of telling her to open up more and introduce herself to other kids. Start eating lunch and playing at recess with DIFFERENT kids. She's been making more friends lately and seems happier.
Bottom line is, with the age our kids are at, it's more up to the parents to "pick" their kids friends. For now at least. And if this neighbor boy is that much older and disrespectful, you're going to just have to end it. If you've talked to his grandmother and that hasn't gotten you anywhere, maybe you haven't made your point. Or if you think you have, then I'd just cut your son's losses. It's not worth your son having a friend whose parents/guardians don't respect you and your rules.
Best of luck!
~K.