So, let me understand this...
When he doesn't settle down into bed at light's out, you send him to wait in the hall until you get the older sibling asleep, and then "when he is ready" he comes and gets in bed quietly and you proceed to rub his back, etc as usual?
Umm.. no. That wouldn't happen at my house. I understand you don't want to disrupt the older sib, but your younger one knows it and is using it to manipulate things. If he doesn't settle right down and gets to go to the hallway while you rub brother's back, then come back on his own time when he is ready... you simple leave when you are done with the brother. The younger one has now forfeited his time with you sitting in there in the dark.
The end.
Yeah... he will pitch a fit. Let him. Just be sure that you warn him in advance what the new "routine" will be: He can't settle down before you are done with brother, then he doesn't get to have you rub his back or sit in the room. You are leaving the room and not going back in when you are done with brother.
Personally, I would be trying to wean them off of needing you to sit in there with them for 20 minutes after lights out anyway. They have each other. That is supposed to be one of the "benefits" of room sharing--the kids aren't alone. So why do you have to be in there, too?
Taking away privileges from the toy room doesn't work b/c it isn't related to the problem. If this were a one-off and son just wasn't sleepy then no big deal... but this has BECOME the routine. So you need to change it. Make the correction fit the dilemma. He won't settle down. So, either he chooses to do so on YOUR schedule, or he does it without you there. Period.
Or, maybe do him first, and let the older one have the extra 5 minutes before he has to be "settled". Or wait until the weekend, and let the older one stay up later and the younger one has an earlier bedtime by 30 minutes from now on. My kids pretty much had 30 minutes bedtime difference, with 3 years between them. They got story time together and prayers, and then I put the younger one to bed and then the older one. He got to look at books or something quietly in his room until the younger one was in bed. But they had separate rooms. So, let the older one have some quiet time with the other parent while you get the younger one down first. Once he understands he isn't running the show anymore, you can do them "together" but still "do" the younger one first.... so if he regresses and doesn't settle down, you do the older one and leave.
You shouldn't have to spend an hour PAST bedtime getting them down for the night.
Usually, a well placed 'threat' to lose mom/dad time after lights out works well. But you have to be prepared to follow through or they will see it as an empty threat (it will be, then) and ignore it.
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ETA: You know, I didn't really note the bedtime. But our kids usually went to bed at 7:00 when they were 2. By the time they were 3 and up, they were going to bed at 7:30. So adjusting the overall bedtime might be something you could do to change things, too. It might solve it, it might not.