It sounds like you are very "in tune" to your stepson. How lucky he is to have you :o) You are in a really tough spot, right now, so keep holding on to that patience.
First, it sounds like an awful lot of punishing is going for long periods of time. This gives him the feeling that "It doesn't matter what I do, because I'm always in trouble anyway!" It's to young for tons of grounding, that needs to be saved for when he's older. Now is the age to let him know what you expect from him, and he will simply follow through, it sounds like he's acting out for attention from his dad.
I would like to know WHY he got in a physical fight with another boy? Was he defending himself? Or did he start the fight? There is a difference, and what kind of boy are you wanting to raise? If he was defending himself then there should be no punishment. The school already handled it with a suspension.
It sounds like you are absolutly right, A.! Your husband needs to back off, and start "bonding" with his son. If it's not going to happen from him, then YOU can form a bond of trust with him. He needs someone "on his side that he can trust".
You really have different issues into your posting, and I don't want to write pages! I have been a stepmom for 16 years, and know really well how hard it is to be in your situation. I also have 2 more boys of my own, and now is a huge age for them to start developing responsibility, trust in you, and respect. It's much easier for him to deal with his own emotions if he thinks his parents are on his side.
As far as his report card goes, he's showing you "he's got what it takes" and he's fully capable of producing your expectations, but he is not behaving that way.
If he were my son, I would sit him down and don't expect for him to look you in the eye (he will be ashamed). Tell him things are moving WAY too fast in his little life, and you think you all are "trapped" in a cycle. Let him know that after you saw his report card, that you know how serious he can be. Ask him why his behavior got out of control. Tell him what you expect from him, have a few things written down. Ask him if you are being unreasonable with your expectations (he will say no, but ask). Then simply tell him you want to "start over". Wipe the slate clean, whatever. But give him a chance to show you what a great boy he is.
He just went through having a new mom, brother, and sharing his dad....of course he will act out!
It sounds like you are very loving, and care so much for him. I am sure that you know exactly what you are supposed to be doing :o) Trust yourself, A.. Mother's really do what is best!