From what I remember I can relate to your nephew. I still think I have a little bit of "the spectrum" as I can switch on and off but I've learned how to take responsibility for my own switch. But he's just a kid.
It doesn't help that he has to go back to his own parents and be subjected to the neglect you describe. Sounds to me like he knows the difference too...and the longer he's under you and your wife's guidance the better it will be for him in the long run.
Might be that you could see if there's a sport he might be interested in. I picked up organized ice hockey at 4 and played till I was 11. The coaches back in the day were pretty good at keeping behavior on an even keel and the social aspect with a peer group can have a lasting stabilizing effect. Not to mention the release of organized competitive aggression.
These are just suggestions as to alternative thinking before this kid ends up on the downward spiral of mis-medication. It doesn't have to be a contact sport but something that he's eager to do, and physically spends his excess energy, to avoid the poor influence of his home life. Let him know he's old enough to decide what he wants to do and support him. He might drop one thing for another for reasons he may not want to discuss but as long as he's free to follow his interests. It's about self actualization to gain self esteem to learn compassion for others. Organized sports is one source for all of these.
As to raising kids, I never have...but they're all great to visit...even the worst of them. Unless heavily armed of course. };-)>
Best of luck with whatever you choose. The two of you can't be of much use to the young boy if you're at odds with one another. He can likely sense this and internalize it, furthering himself from his better qualities. Take care of you so you can take care of life...as it happens.
Keep on Steem'n on!
Thanks @cryptologyx, I can't personally relate to the subject of sports because the only sport I ever played was baseball (and nothing like being a short, chunky, non-popular kid playing baseball). So I ended up quitting that before High School.
I can definitely see the value of sports and we've thought about this as an option. Moving parts being what they are makes it tough to make that call. I can agree completely, however, that I think we do have to find him some sort of physical outlet.
It's hard when neither of us are in good shape, so a sport might be perfect. I'll have to see what's out there right around us.