How do you approach this?

He's a freshman who already has drawn interest. What is there to be concerned about? Have the surgery, rehab and get back on track.

The surgery is already set, the concern is how do you break the news to schools that are interested in him and once they find out is it going to follow him for the next few years? I can tell you as a former football player I tore my MCL sophomore year and schools questioned my coaches and I about it all the way up to Dec of my senior year. Football is a much more physical sport though, so I don't know if it is such a big concern. 

Sorry about your brothers injury. 

This is an opportunity for your brother to continue communication with college coaches about his physical and academic progress.  Grades and his rehab should be his focus IMHO.    For those colleges that were interested, they'll want to see what he does and how he does it.  While the injury was a set back there is still time to demonstrate his skills to those who are interested.

Good luck to you and your brother.

I think what the kid is asking is should the player tell the coaches he is out with an injury.

In a nutshell yes, I am just trying to get some opinions on how you approach it. What kind of advice I can give him when he brings it up with a coach via phone/email. 

To clarify, yes, be honest and direct about his condition with the interested coaches.  Explain the condition, and timeline to recover.  Again, this is a unique opportunity for your brother to show the coaches that he is focused on playing at the next level despite this early setback.  JMO.

It's always the right thing to do the right thing.  Yes, tell them.  If they have more than passing interest, they will certainly know / find out eventually.  Much better to be up front.  As Fenway pointed out, this will be additional opportunity for your brother to impress those he is in communication with.

His rehab will be a good time to get his academics in shape and do some test prep.

Absolutely tell them.  It was a freak injury that happened during a play.  It happens....they'll understand.  It's a serious injury....but it's not like you're calling a coach and telling them a 14 year old pitcher is having Tommy John surgery.  I wouldn't think that any interested coach is going to have any issues with them.  He's got plenty of time to recover. 

If you are honest and he comes back full strength nobody will care.

Both of my son's have experienced this same injury.  Both while batting and both nearly at the same age.  In both cases, the back knee dislocated while hitting a ball.  

With my first son, it occurred the summer following his freshman HS season.  He was advised to rehab.  He did, was cleared to play, and it occurred again.  He was advised to rehab more aggressively, which he did, was cleared to play, and it occurred again, all during that same summer.  He underwent surgery in November of his sophomore year, sat out spring HS ball his soph year, played summer and did fine.  Received interest and offers and there was no issue with any schools that he had this issue.  Just a comment, unless your brother never intends to wear shorts around the field, he'll have a hard time not explaining scars around the knee.  It is very evident that my son has had surgery.

My second son had the same injury during his sophomore season.  Because I wasn't pleased with the approach of the first Orthopedist took with my oldest, we sought a different doctor.  He approached with much more attention and a more structured rehab program.  He returned to playing during that same HS season, played a full slate of summer, including some high level showcases.  Has committed to a strong D1 and is getting a lot of pro attention. He has had no loss of speed or ability from the injury.  We have been completely forthcoming on his health and history.  Many of the pro information sheets he's been asked to complete are VERY detailed on injury history.  We are not hedging anything.  It hasn't seemed to hinder interest in any way there as it didn't on the college side.  He's a year removed from the injury and continues to perform at an extremely high level, with all of his numbers improving over last year.

I say all that to tell you this.  Be open and honest.  Your brother will likely return to his full status.  The biggest hurdle for him will be the mental aspect.  I was scared to death every time mine swung a bat for months following their return to play.  They were both a bit cautious at first, but quickly had the confidence to return to normal.  In the end, your brother will be fine and back to 100%.

If you have any questions, specifically around the injury, surgery and rehab, shoot me a PM.

Honesty is the way to go. Given his age the interested programs will have time to see him in person when he's healthy. It can't hurt to inform the interested programs when he's back on the field at 100%.