Isn't Manipulative!Dumbledore gonna send James off to the Dursleys, where he'll be beaten and starved and rap...

Oh wait.

Here's one. How did Dumbledore know that Voldemort is still alive? Legilimency? Omniscience? Rowling sucks as a writer?

Definitely, the third one. While Dumbledore (Rowling) never says (writes) that Voldemort is still alive in the first chapter of Book One, he (she) does say (write) that Harry will have The Scar for the rest of his life. (I just went and checked)

Lily wasn't given a chance to step aside. So, Riddle was able to kill Harry.

He can kill Harry because Lily was not given a choice to stand aside or die.

Please continue this story

Your story is flawed. Voldemort can't kill Harry because of Lily's sacrifice.

Great start, please update. It's really sad that Lily and Harry died.