Kyle is lucky that he has good friends like you & DH to help him out.
I think it is absolutely fine for you to have house rules which include 'no burning, no naked flames, no alters' inside the house. I think that trying to come up with options to accommodate his needs, such as letting him perform rituals in your garage/garden (if you feel comfortable with that) is considerate but not required of you.
I think it is also reasonable to discuss with him what you feel comfortable with. You've made several comments in this thread which show that you respect his spiritual/ religious views and are not seeking to convert him, so I think if you approach the conversation with him with the same attitude then you should be able to have a discussion about what he feels is needed to meet his spiritual / religious needs, and what you and DH feel comfortable with.
I think it would be sensible to start with something similar to what you said here , that you know his religion is different to yours, and respect that, and that you are in no way seeking to prevent him from whatever prayer/meditation he wishes to use in his own room, and then go on to discuss what things you are and are not comfortable with, it is much less likely to be perceived as critical or prejudiced, and you are much more likely to be able to discuss the options and come up with a compromise everyone is comfortable.
Be open to the possibility he may also have queries about your expression of your own religion (do you say grace before meals, for instance, and is he comfortable joining in with that? Are you comfortable with him eating with you and *not* joining in?)
I think the suggestions about trying to help him find other individuals or a place which is not part f your house to set up an alter or sacred space are very sensible, and again, raising these early in the conversation will hep reassure him that you're not attacking his beliefs or his expression of them, which is likely to make him much more receptive to the house rules you do decide on.
I think it would be sensible if you and your DH can speak to Kyle together - that way, you don't have any misunderstandings about anyone's level of comfort, and you can all hear any new information/clarification which might make a difference to your views.