Your statement "no boat is OCS" might be incorrect.  It depends if the late starter is inside the "H" formed by the start line and the 90 degree lines from each end.   If the late starter is inside the "H", she is OCS and the RC SHALL signal X flag.  If she is outside the "H", (the extensions of the line),  she is not OCS and the RC has not reason to signal X flag.  If within the H, and the RC did not signal X flag, the late starter could sail straight to the first mark.  By not signalling, the RC would then open up various protests, RFR, etc. regarding the incident.   Better to just follow the cook book as written. 

Do NOT display IC Flag X.  The boat5 300m from the start line has no standing in the start because she is not RACING nor INTENDING TO RACE (based on the preamble of Part 2), and therefore is not participating in the subject start.  Once she reaches the pre-start side of the line, she may be considered racing, assuming that she fulfills any requirements in the SIs for a late start.  Making the signal in this situation will only sew confusion and doubt in the large group that has started properly, which may cause a loss of fairness to them.  A fleet that starts properly, and that well, should not be potentially penalized by such a superflous signal.

In these circumstances the rya recommend no ocs call to ruin the start. The other boat can be recorded ocs and cannot really claim redress there was no ocs call as it was obvious he had not complied. Just let the race go on.

Definitely let the race go with no X=ray.  It is manifesty unfair on the boats that were staring to signal X-ray for a boat 300 meters up the course.  Even a boat sailing in the opposite direction down towards the line 100 meters up the course should not be X rayed. Instead keep an eye on her that she does sail to the pre-ourse side before starting.  If she does not and 'joins the race' 50 meters from the line should be protested,  maybe under rule 2 if not 69. 

Randy,
"H"?.  Th rule is for the line and its extensions.  I was taught that the starting line extends around the earth until in runs back into itself.  ie. the line is a straight line continuation from both the starting marks.  A boat outboard and forward if the line is OCS, but  not in an "H".

Great comments.   Looks like I am in the minority so far.   3 Questions:

1.  Is 300 meters up the course "In the racing area"?   I think yes.
2.  Is the OCS boat "intending to race"?  I think yes.
3.  If the OCS boat is not in the racing area and not intending to race, how did you determine this?

I guess the short answer is it is within the discretion of the RC whether or not to signal it as OCS.  The RC need not anticpate what the late vessel intends to do.  Given the circumstances, I would not signal OCS as it would likely raise confusion for the legitimate starters.  ( I suppose if the situation allowed me to immediately hail the one vessel's sail number, i might think differently.) If the late starter did not then start properly, I would score him OCS.  He would have a hard time claiming redress.  

The primary function fo the RC is to ensure fair racing, The RC might know the late starter is coming to the line, but will the lead boat know it?  If the first over the line mistakes the OCS call as being for him and returns to restart, he could seek redress.  A good PRO responds using common sense.  I PROd a race where an entire fleet started, all crossing the line within seconds of each other-and I later noticed the class flag had never been taken down-no one noticed-no harm no foul.  In another similar instance, two skippers stopped and looked at me quisically poinitng to the still raised class flag-in the second case I recalled the fleet and re-started.  Common sense and fairness.

As a judge, I heard a redress in which a boat started a full minute early-when the prep came down.
All sounds and flags were correclty displayed.
The RC assumed he was not racing.  He was first over the finish line and when advised the RC contended he was not racing, claimed redress based on failure of the RC to call him OCS at the start. (Not sure if they recorded him OCS or DNC).
Redress was denied based on the finding that the vessel could not prove that her position resulted from "no fault of her own" or that the RC "committed an improper act or omission."

In the past, we've had a somewhat similar situation when, after a postponement, a boat was seen to start at its scheduled time but with what was, by then, an earlier class.  We took the view that it was unfair to other boats in its class to signal X-ray at their actual start because of a boat that is now 10 minutes down the race track. Was that right?  The boat concerned was scored OCS, which was accepted with explanation, without a redress request for the lack of X-ray. 

I more or less agree with Stephen except that I would score the boat DNS rather than OCS if X-flag was not flown and the boat did not start per the definition. It should be very obvious to the boat that she was well above the starting line so she is not entitled to redress even if the RC fails to signal individual recall.  I think you can look to Case 31 which states in part....a boat that realizes that she is that she is on the course side of the starting line is not entitled to redress and she must comply with rule 28.1..........
 

DNS may require a jury hraring A5 ocs does not. 

Randy Smith - I think you are confusing match racing's "H" start/entry configuration with fleet racing's simple starting line.
Michael Butterfield - A5 permits a race committee to score a boat DNS if she does not start.  No hearing is required.  However, the appropriate score in this case would be OCS if in fact the boat did not sail completely to the pre-start side of the line or its or one of its extensions and complied with rule 30.1 if it applied.

1st Commandment of Race Management - Thou Shalt Not Confuse the Competitors.  
By displaying X with one sound, you are "casting the net" and you will affect the fairness of the race by instilling doubt in those boats that were close, yet started correctly.

By not displaying X with one sound, you may end up in a redress hearing, in which the requestor will be asked, "Did you know you were on the course side of the starting line at the starting signal?"  As soon as they answer "Yes" the hearing is essentially over.

From Case 31:

However, a boat that realizes that she was on the course side of the line is not entitled to redress, and she must comply with rules 28.1 and, if it applies, rule 30.1. If she fails to do so, she breaks those rules. In addition, she fails to comply with the Basic Principle, Sportsmanship and the Rules, and breaks rule 2.

I think that most, if not all, experienced PROs have sometimes decided not to signal an individual recalll when a premature starter clearly is headed back toward the line at or just after the start, and everyone else has started properly.  This is much fairer to those who started correctly.  This situation descirbed above is very similar in my mind.

I would not signal Xray but monitor the boat until it starts correctly or turns upwind.  In the latter case, file a protest.  The odds that the OCS boat will receive redress are almost zero.