"bright young man"
They might argue that the standard required is "very bright", but this is not clear.
"....... reached the conclusion he may not get high level 5's even though that is what school have predicted"
Some primary schools may be over-optimistic, but it would be interesting to know on what basis the panel reached their conclusion. The clerk's notes really ought to clarify.
is the panel supposed to make their own assessment of the work submitted?
The code of practice says: The panel should not attempt to make its own assessment of a child’s ability.
[my bold print]
The panel might be able to justify its decision, and the clerk's notes might have an answer for your doubts, but I would agree that the decision letter lacks clarity, and you are left wondering why the panel chose to overrule the school's judgement about KS2.
It would be worth seeing what the ombudsman thinks of this.