Don't worry about making him a jerk. :) Giving honest and loving praise to your kid(s) can only make them feel good- it will never hurt! And in first grade, they're so smart! (I was a first grade teacher before I became a mama.) So don't tell him, "You're such a good reader!" to make him feel better. Instead, say things like, "Nice work! Good try! That was great reading!"
Also, try to get some neat reading materials at home. Books and magazines he picks for himself, but that are level-appropriate. And then read them with him every day!
Computer games REALLY help, especially with boys at this age. Anything involving sounds (phonemic awareness), connecting words to the pictures, and encouraging predictions- that's good stuff! There are some fun board games too, and family game night is another way to sneak in practice without him knowing.
Finally, don't worry too much. First grade is a year where some kids explode with their skills, but it may not happen until April or May. Or it may not happen until 2nd grade, which is still okay! Keep in touch with the teacher, express your concerns about his stress level (which is much more of a true worry at this point, because it can lead to a serious hang up), and keep telling your little guy that he'll figure it out.
You'll be amazed where he is by the end of the year, if he's got your support and a loving teacher. I promise! :)