Here we are five years after I wrote that post and I can say that only a few months after I wrote it, the issue was solved. The couple arrived in February 1930 with their 3 year old son. The name was changed to SHERMAN in 1935 when the family naturalized although the 1940 census still shows the original name.
Although I did not mention adoption, this is indeed what it was about. I was born and adopted in NYC and this couple were my maternal grandparents. Case closed.